China's past foreign investment practices meant that it had essentially subsidized foreign consumers with its resources and raw materials but had been left with huge amounts of pollution, Ren Yong, deputy chief of the environment and economic policy research center of the State Environmental Protection Administration, said.

In Qingdao, an east coast summer resort, the city government had not approved even one overseas-invested smokestack facility since the latter half of 2006. Sun Hengqin, vice director of the foreign economy and trade bureau of Qingdao City, said: "The day is gone when the more overseas investment, the better; we have now become picky."

In the meantime, China has made painstaking efforts to save energy and reduce pollution.

According to Wen, many obsolete production facilities were shut down over the past five years in accordance with the law. They include iron smelting facilities with a total capacity of 46.59 million tons, steel plants with a total capacity of 37.47 million tons and cement plants with a total capacity of 87 million tons.

Zhang said that China had entered a new stage from the perspective of use of overseas investment.

"Great attention will be paid to the quality of overseas investment and its harmony with China's overall economic development strategy," he said.

Zhang added that overseas investors should locate centers for research and development, operations and logistics here in China, instead of moving their "chimneys".

Tighter controls haven't deterred investors, at least so far. China had US$11.2 billion of paid-in overseas investment in January, up about 110 percent year-on-year.

Philip Tong, chairman of the overseas-invested ventures' association in Shunde, a city in the Pearl River Delta, said that the rules of the game had changed: low energy consumption and environmental protection were two core factors in considering overseas investment. Tong, who also runs an auto parts business in Hong Kong, added: "We should be quick to learn to adapt to the changed situation."