FOREIGN direct investment in Shanghai increased 12.5 percent from a year earlier to US$1.51 billion in May, extending the double-digit growth for another month when the nation's FDI growth was less than 1 percent.

Shanghai's FDI growth slowed a bit last month from a pace of 14.9 percent in April, but it remained strong with 341 foreign-invested projects signed in May, according to the Shanghai Statistics Bureau.

Contracted investment in the manufacturing sector, nearly one-fifth in the total FDI in Shanghai, jumped 9.3 percent year on year in May. Investment in the service sector expanded 3.4 percent, representing four-fifths of the total.

Jeffrey Wang, vice president of the Shanghai Foreign Investment Development Board, said earlier Shanghai's stable economic growth, its friendly attitude towards foreign investment and a well-regulated business environment have made it a favored destination for foreign capital.

Shanghai's economy expanded 7.8 percent on an annual basis in the first quarter, up from an increase of 7.5 percent in 2012.

With only 0.06 percent of China's land, 1.8 percent of its population and 1.7 percent of its investment, Shanghai produced more than 4 percent of the nation's overall economic output.

Shanghai is the city where many reforms start, a point of strength appealing to foreign investors.

Xu Quan, deputy director of the Shanghai Financial Services Office, said yesterday that Shanghai is waiting for the central government's approval for a free trade zone pilot program in Pudong. Under the program, Shanghai can test deregulated interest rates and exchange rates and some financial products, Xu said.