China remains the most popular destination for foreign direct investment (FDI) in the world, a report by the United Nations Conference on Trade and Development (UNCTAD) said Tuesday.

The report, 2010-2012 World Investment Prospects Survey, was released at the 2010 UNCTAD World Investment Forum (WIF) in Xiamen, Fujian province.

According to the survey, for the next two years China will likely remain the largest destination of FDI worldwide and will likely emerge as the second largest country for outbound direct investment (ODI), next only to the United States.

Of the top 15 most popular FDI destinations, nine are developing countries. Brazil, Russia and India all made the top 5.

The survey also predicts worldwide FDI will pick up as the world economy gradually recovers from the financial crisis, and the next two years are likely to see a stable increase in FDI volume.

Earlier this year, China's investment environment was criticized as deteriorating, and the acute criticism gave rise to doubts that China may lose its attractiveness as an FDI destination.

"Chinese domestic businesses became more and more competitive over these years. That is the fundamental reason why the foreign businesses felt the investment environment is deteriorating," said Chen Deming, Chinese minister of commerce, on the sidelines of 2010 UNCTAD World Investment Forum.

Ironically, given the widespread vocal concern about China's investment environment, more and more FDI is flowing into China.

According to official statistics, China's FDI increased by more than 20 percent year-on-year, for the first seven months of this year, to US$58.3 billion. During the same seven-month period, the number of foreign companies increased by more than 14,400, up 17.9 percent compared with last year.

Worldwide, as the world economy is still shaky from the financial crisis, FDI volume dropped 39 percent last year, according to figures released by UNCTAD, "but China's FDI only decreased by 2.6 percent," said Chen. In his opinion, the large inflow of FDI indicates China's investment environment is only getting better and better.

The year 2009 is the 18th consecutive year that China has been the largest FDI recipient, and with more and more FDI flowing in there is still room for improvement, Chen said.

At the opening ceremony of the UNCTAD 2010 World Investment Forum (WIF) on Tuesday, Vice-President Xi Jinping said China is dedicated to creating a "more open and optimized" investment environment for foreign businesses.

Over the next two or three years, China will take measures to increase FDI in sectors that produce more high-value added commodities, like high-tech, as well as service sectors, said Chen.

In the ministerial round table meeting on Tuesday afternoon, part of WIF, Chen welcomed FDI from all over the world, and emphasized China intends to continue attracting FDI while enlarging its own ODI volume.

FDI will bring not only technologies and products into China, but advanced management expertise and more talent, Chen said.

At the round table meeting, Chen also proposed to leaders and officials from 200 countries that investment policy should be made in such a way that FDI could be better channeled into developing countries.

"China's ODI will mainly focus on developing countries and regions, with the rest going to the developed countries. The world economy will have little room to improve if FDI steers clear of the developing and less developed countries." Chen said at the round table meeting.

Meanwhile, trade protectionism is one of the problems Chinese businesses frequently encountered in their ODI.

Trade protectionism could be implemented on the pretext of national security, but such conduct will only harm the world's economic recovery and push the jobless rate higher, he added.

"China's FDI this year is expected to reach US$100 billion, an 11-percent growth year-on-year. And China's ODI is expected to increase to more than US$50 billion," Chen said.

(China Daily September 9, 2010)