Foreign direct investment in China, the world's fourth-largest economy, grew 9.9 percent in the first five months from a year earlier.

Spending by overseas companies rose to $25.26 billion, the Ministry of Commerce said Wednesday on its Invest in China Web site. In May, foreign direct investment climbed 8.7 percent to $4.9 billion, according to the Web site.

Low manufacturing costs and an increasingly wealthy consumer market of 1.3 billion people are luring businesses to set up operations in the fastest-growing major economy.

Companies backed by foreign investment produced 58 percent of China's record $969 billion of exports last year, the Ministry of Commerce said.

"China's large trade surplus is a result of government policy over the past two decades of attracting foreign direct investment, most of which ends up in manufactured goods for export," Fan Gang, a monetary policy adviser to the People's Bank of China, said on June 5.

China's trade surplus last year swelled to a record $177.5 billion, stoking tension with the U.S., where lawmakers say the nation's undervalued currency gives Chinese exporters an unfair advantage. The size of the gap is growing faster this year.

China was the world's fourth-largest recipient of foreign direct investment in 2006, according to the United Nations. Spending by overseas companies climbed 4.5 percent from a year earlier to $63 billion. Including the financial industry, investment fell 4.1 percent to $70 billion.

300,000 Factories

"Chinese workers are reasonably trained to make good-quality products," said Harry Khushi, director of Hong Kong- based Star Company International Group Ltd. which has two joint-venture factories in China to make gift products.

Foreign manufacturers had more than 300,000 factories in the nation by the end of last year, according to a report by HSBC Holdings Plc.

Carlsberg A/S, the Danish company that made its first beer in 1847, said it plans a new brewery in the northwestern city of Lanzhou. Formosa Plastics Corp., the world's second-largest maker of polyvinyl chloride, will expand a PVC plant in the eastern city of Ningbo, the Taiwanese company said.

China's economy grew 11.1 percent in the first quarter from a year earlier. At the same time, disposable incomes in urban areas jumped 19.5 percent and rural households' earnings climbed 15.2 percent.

Investment by foreign businesses has helped to push the country's currency reserves to a record $1.2 trillion, more than a fifth of the world's total.