China encourages foreign investment that helps upgrade the country's agriculture, service and traditional manufacturing industries.

    So said Vice Premier Wu Yi at the International Investment Forum on Friday.

    "We expect multinational companies to transfer the high-end link in manufacturing and research and development bases to China," she said.

    Wu said she hoped multinationals would attach more importance to innovation and technology investment in China, improving the added value of their products and strengthening cooperation with Chinese enterprises and research institutes.

    The government plans to adjust its Industry Guide for Foreign Investors, aiming to channel more investment into research and development centers, new high-tech industries, advanced manufacturing, energy conservation and environmentally friendly sectors.

    The vice premier urged multinationals to invest in Central China, West China and Northeast China.

    Wu said service outsourcing would become a new area for China to attract foreign investment as the country enjoys advantages in human resources and infrastructure.

    The global outsourcing market is expected to hit 1 trillion U.S. dollars by 2008; China currently lags behind India in the sector.

    Wu called on multinationals to shift outsourcing businesses of a certain scale to China and said the government would assist them to do so.

    In the past 27 years, 575,00 foreign-funded enterprises have been set up in China, tapping nearly all sectors including agriculture, manufacturing and services. These businesses not only account for a significant amount of China's imports and exports but also provide tens of millions of jobs and a large sum of tax income to the country.

    Officials and experts at the forum agreed that China is not only a leading recipient of foreign direct investment (FDI), but also a growing investor.

    Kandh Yumkella, director general of the United Nations Industrial Development Organization, predicted "an annual average growth rate of 20 percent in China's overseas investment would translate into 60 billion dollars worth of Chinese overseas investment by the year 2010." China's outbound investment hit 12.3 billion dollars last year.

    "This fits into a global trend toward increased south-south investment in which China and other Asian economies have been particularly active," said Supachai Panitchpakdi, secretary general of the United Nations Conference on Trade and Development.

    He said the subject would be highlighted in the World Investment Report 2006 to be released on Oct. 16.