FOREIGN direct investment (FDI) in China rose 38 percent year on year in February, adding to a pool of cash that threatens to stoke inflation already at an 11-year high.

Spending by overseas companies increased from a year earlier to US$6.9 billion, the Ministry of Commerce said yesterday on its Web site. Investment in the first two months climbed 75 percent to US$18.1 billion.

Commerce Minister Chen Deming attributed the January-February jump to the strengthening yuan and a big increase in large projects.

In the first two months of the year China logged two and a half times more projects with a price tag of more than US$30 million than in the same period of 2007, he told a news conference during the annual session of parliament.

As growth in the developed world slowed, companies were looking more closely at higher-growth emerging markets including China, where the investment climate continued to improve, the minister said.

Premier Wen Jiabao said last week that inflation and overheating were the biggest threats to the economy this year. The central bank is paying close attention to “excessive” growth in foreign direct investment, the China Securities Journal reported this month, citing Hu Xiaolian, director of the State Administration of Foreign Exchange.

“There is already too much liquidity in China and the authorities don’t want see more coming in to accelerate inflation,’’ said Mihoko Hosokawa, an economist at Mizuho Research Institute Ltd. in Beijing.

(SD-Agencies)