China remains a magnet for FDI with its massive market potential and improving infrastructure. But the government is getting more selective about the quality of investment it seeks. It has started to curb investment in energy-consuming and environment-polluting industries, instead encouraging investors to go into the hi-tech, modern agriculture and service industries.

The government is also trying to bring more investment to the less developed northeastern and western areas of the country.

Meanwhile, capital outflow is increasing. Chinese businesses invested over $18.6 billion overseas last year, while total outbound investment was just $2.5 billion in 2002, according to the commerce ministry. Outbound investors are most active in the financial, mining and oil sectors.