China's economy continues to attract giant levels of overseas cash

Despite efforts by China's government to cool its fast-growing economy, the country drew in almost $8bn (�4.3bn) of foreign direct investment last month.

June's $7.97bn figure was up 14% on the previous high of $7.66bn set in the same month last year.

For the first half of 2004 as a whole, China's foreign direct investment was up 11.99% on last year to $33.9bn.

HSBC economist Qu Hongbin said the figures show that overseas investors believe the Chinese government is able to prevent the economy overheating as it continues to expand rapidly.

"Basically the message is that the long-term investors and foreign multinationals have been little affected by the policy tightening measures," he said.

"You could also read it as people are still pretty confident that the government is able to manage overheating."

Carmakers

The Chinese government has moved to contain the country's ultra-rapid economic growth as supplies of power and raw materials have become stretched and started to fuel inflationary pressure.

Actions it has taken include enforcing some lending restrictions and the tightening of land-use rules to slow industrial developments.

Yet Beijing still warmly welcomes foreign investment, not only as a source of cash, but also for the overseas technical and managerial expertise.

Foreign companies are in turn attracted by China's vast pool of cheap labour and the fast-growing economy.

Back in June US car giant General Motors said it would invest $3bn to double capacity in China by 2007, and Germany's Volkswagen said it would spend $900m on two new engine plants and a car factory.

The Organisation of Economic Co-operation and Development also reported in June that China overtook the US as the biggest recipient of foreign direct investment in 2003.