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UNITED NATIONS, Wednesday (AFP) China took over from its special administrative territory Hong Kong as the largest recipient of cross-border private investment in Asia and in the developing world in 2001, a United Nations agency reported on Tuesday.

But the two separate customs areas continued to dominate Foreign Direct Investment (FDI) flows into the Asia-Pacific region, despite an overall 24 percent decline for the area last year, according to a report by the UN Conference on Trade and Development (UNCTAD).

In its World Investment Report for 2001, UNCTAD said China shed three years of stagnation as foreign companies poured 15 percent more investment into the country compared to the previous year, reaching 46.8 billion dollars in 2001.

That momentum was boosted in the first half of this year following accession to the World Trade Organisation (WTO), with inflows to the Asian giant rising by 19 percent compared with the first six months of 2001. "The upward trend in FDI is likely to be sustained in the coming years, particularly in the light of the country's accession to the WTO," the report said.

Investment in Taiwan also remained at "historically high levels" (four billion dollars), thanks to the island's WTO accession, it added.

In the absence of any global scale mergers in 2001, FDI in Hong Kong dropped by 60 percent to 22.8 billion dollars. UNCTAD said the fall from a record 62 billion dollars in 2000 accounted for much of Asia's decline.

But the Chinese territory continued to reinforce its position as a business hub, with 3,237 multinationals maintaining regional offices there, eight percent more than in 2000.

The overall Asian data does not include Japan, which is listed under a separate group of developed countries.

"Japan's domestic investment fell in 2001 (six billion dollars), but its investment abroad grew by 21 percent to 38 billion dollars and is expected to keep growing," the report said.

South and Central Asia's share of the FDI grew, with growing liberalisation fuelling 3.4 billion dollars of foreign investment in India in 2001, up by 47 percent.

A doubling of investment in Kazakhstan's natural resources, including oil, gas and metals, helped drive up Central Asia's FDI by 88 percent to 3.6 billion dollars.

Overall flows to South-East Asia stagnated at 13 billion dollars, notably due to continued divestments in Indonesia because of the uncertain political climate in recent years.

However, most of the Asian "tiger" economies continued to attract more investment, the report indicated. FDI in Singapore rose for the first time in four years, increasing by 59 percent to nine billion dollars. Foreign investment in Thailand grew by one billion to 3.8 billion dollars.

Inflows to the Philippines also climbed from 1.23 billlion in 2000 to 1.8 billion in 2001.

UNCTAD said Vietnam was "entering a new era as a host to FDI", helped by bilateral trade agreement with the United States and accession talks with the WTO.

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