The actual utilization of foreign direct investment (FDI) rose 27.48 percent from last year to $8.13 billion in May, Yao Jian, spokesperson for the Ministry of Commerce (MOFCOM) announced Saturday in a news conference in Beijing. In the first five months of the year, foreign investment reached $38.92 billion, up 14.31 percent year-on-year, according to MOFCOM.

Strikes took place over the past few weeks at foreign-invested factories in South China's Guangdong Province forcing employers to give substantial pay hikes. Many provinces and cities also recently announced an increase of around 20 percent in minimum wages effective July 1.

Foreign investment has boosted China's economic growth and employment, Yao said, adding the level of wages will continue to increase.

The wage increases have some worried that rising labor costs in China could have an impact on foreign investment.

But Yao said cheap labor is not a major factor influencing foreign investment into China at the moment. The spokesperson added that China is attractive for foreign investment mostly due to its stable political environment, continued high economic growth and further improving legal environment.

China's vast market, complete industrial supporting facilities and an increasingly well-educated work force also contributes to the country's for-eign investment inflows, Yao said.

Only around 37 percent of goods produced by roughly 290,000 foreign-invested enterprises that operate in China are for export while about 63 percent are sold in the domestic market, according to Yao.

Production plants based in China reduce transportation costs considerably, said Lu Ting, a Hong Kong-based economist at Bank of America- Merrill Lynch.

And pay rises will boost purchasing power of the workers, helping spur domestic demand, Lu added.

It is not easy for these enterprises to find substitute areas to transfer their production, as some other regions with lower labor costs are not expected to have complete supporting industrial facilities and as efficient workers as China, Lu said.

He expects the FDI will continue the growth trend seen in the first five months over the rest of the year.