Shanghai, the economic engine in east China, approved establishment of 909 foreign-funded projects in the first quarter of this year, taking in 3.17 billion U.S. dollars in contracted foreign direct investment, according local government sources.

The sources said the pledged FDI went down seven percent from the same period of last year.

The decline was ascribed largely to tightened government control on land use and promulgation of the new corporate tax law.

The sources said tightened land-use control has crippled foreign investment in real estate and related manufacturing sectors.

Between January and March, the city approved establishment of 26 foreign-funded property development projects, involving 612 million U.S. dollars in contracted foreign capital, down 31.12 percent.

The sources said of the 909 projects approved in the three months, 58.9 percent were projects to replenish capital into existing foreign-funded enterprises, who were believed to make use of the continued tax holidays in the grace period set by the new corporate tax law. Most of them were from the manufacturing sector.

The new Corporate Income Tax Law passed in March of this year unifies the income tax of domestic and foreign-funded enterprises. According to the new law, some tax preferential treatment to foreign-funded enterprises will be adjusted or cancelled, and domestic and foreign-funded enterprises will be treated equally to pay corporate income tax at a rate of 25 percent.

In breakdown, Shanghai approved establishment of 196 foreign-funded manufacturing projects, taking in 1.26 billion U.S. dollars in contracted foreign capital, up 3.34 percent year-on-year.

The city recorded 499 million U.S. dollars in pledged FDI for leasing and commerce projects, up 8.16 percent, and 186 million U.S. dollars for other service projects, up nearly 240 percent.

Shanghai actually used 2.02 billion U.S. dollars in the first quarter, up 2.2 percent, the sources added.