BEIJING - CHINA may allow foreign firms with investments inside the country to list domestically, as part of efforts to boost trader confidence during the global downturn, an official said on Thursday.

'We will continue to actively work with relevant authorities to study and complete the policy of allowing foreign-invested companies to list in the country,' Vice Commerce Minister Chen Jian told reporters. 'We will guide high-quality foreign-invested companies to carry out domestic listings at appropriate times,' he said.

China has repeatedly said in the past that it was considering plans to let foreign invested companies sell shares here. But analysts said such a policy looked more likely this time given the massive impact of the global economic crisis on China, which has seen growth slow to 6.1 per cent in the first quarter, the lowest in at least a decade.

Foreign direct investment in China has fallen for an eighth straight month, the first 'comprehensive fall' since the 1998 Asian financial crisis as Mr Chen described it, as overseas firms grow more cautious due to the downturn. The latest data show China received US$34.05 billion (S$49.4 billion) of foreign investment in the first five months of the year, down 20.4 per cent from the same period a year ago.

'One objective with allowing foreign invested firms to list domestically is to boost foreign investment in China,' said Chen Xingdong, an economist with BNP Paribas in Beijing.

Global banking giant HSBC said earlier this year that it 'would like to be the first foreign bank to list in Shanghai if the authorities allow it.' However, Ma Jun, a Hong Kong-based economist with Deutsche Bank, doubted whether industrial firms, in the face of sluggish market demand, would be interested in raising public funds even if they were given permission.

'I don't think the policy will result in excited reactions due to the serious overcapacity problem around the globe,' he told AFP. 'Many multinational companies I talked to are all cutting investment. They don't have the motive to raise capital and create more capacity.'

Mr Chen said the government is planning measures to stabilise foreign investment, with a focus on projects that will help create jobs, save energy and protect the environment. 'We will continue to work on the creation of a stable and transparent policy environment, level and open market conditions, and regulated and efficient administrative services for foreign investment,' he said.

However, Mr Chen indicated there would be no change to an order announced last month stating domestic firms should be prioritised in bids for projects that are part of a US$585 billion stimulus package unveiled last year. The order, dubbed 'buy China' by some media, has met with criticism abroad, with some saying it could be a first step towards protectionism.

China has defended the measure by saying that so far local governments have tended to favour foreign companies over Chinese ones when signing contracts for projects under the stimulus plan. 'The problem now is not that we are protecting (Chinese companies), but that there are signs that domestic products are discriminated against. We just want an impartial environment,' he said. -- AFP