The growth rate of China's outward direct investment last year was much slower than the increase China made in 2004, but it still indicated progress for China's "go-out" policy.

China's outward direct investment totalled US$6.9 billion in 2005, up 26 per cent over the previous year, according to Bo Xilai, minister of commerce.

The information and telecoms industries, mining and manufacturing sectors attracted the most investment from Chinese companies.

"Chinese enterprises are moving into projects with high quality and high technologies," Bo said.

China's outbound investment in 2004 skyrocketed over 90 per cent from the previous year, concluded with the country's leading PC maker Lenovo acquiring IBM in December.

Aiming to help Chinese companies play a greater role as overseas investors, the government has been encouraging a "go-out" strategy to conduct overseas acquisitions and other investments abroad.

Bo said the government has worked out a series of guidelines and established specialized funds to help Chinese companies predict and address problems with the "go-out" process.

The Ministry of Commerce set up a reporting mechanism last year, requiring companies to report overseas mergers and acquisition intentions.

The ministry will provide the company with information about the potential investment destination, including the policies, regulations and investment environment. It will also help to analyze possible risks there.

The government also simplified application procedures and improved its services for outward investment information.

However, the country's outward investment is still small compared to the US$60.3 billion of foreign investment to China in 2005.

China ranked as the second-most attractive foreign direct investment destination across the world, but 27th among global investors.

One of the ministry's major tasks is to encourage and help companies' outbound investment this year and throughout the country's 11th five-year plan.

"As for the 'go-out' policy in the coming five years, we should both speed up and attach great importance to the quality and risk management," Bo said.

Last year also saw rapid growth of China's contracting business and outward human resource allocation, said the minister.

Meanwhile, Bo estimated China's retail sales had risen 12.9 per cent in 2005 to 6.7 trillion yuan (US$ 827 billion).

His prediction is lower than the 2004 growth figure issued by the statistics bureau, 13.3 percent. China statistics bureau is expected to issue the official figure on Wednesday.

China is trying to promote consumption as a more reliable source of demand than investment and exports.

"We should expand consumption while changing the growth model for foreign trade and promoting a basic balance in trade," Bo said.

He said this year China will also improve the building of circulation network in rural areas.

He expected that the network would bridge the exchange of both industrial and agricultural products.

The government expected to establish large scale wholesale markets across China and cultivate some large enterprises involving in the circulation of agricultural products.

Source: China Daily