Foreigners have gained a strong foothold in some sectors of China?s economy and Beijing must act now to prevent more domestic firms from falling prey to multinationals, a senior government official said yesterday.

Li Deshui, head of the National Bureau of Statistics, called for legislation to curb ?ill-willed? acquisitions of domestic companies by foreign firms and to scrap the country?s decades-old preferential policies for foreign investors, notably tax breaks.

?Initially forming joint ventures and setting up wholly owned factories, multinationals are now mounting a large-scale drive to merge with, or acquire, high-quality Chinese companies,? Li said.

?Some multinationals believe it?s the best time to acquire Chinese firms, because they are far cheaper than US and European companies,? he told Reuters in an interview on the sidelines of the annual session of parliament.

The warning came amid a heated debate among academics and officials about the pros and cons of Beijing?s policy of opening its economy to foreign investors, which has helped transform China into a global manufacturing hub but has also fuelled frictions with its trade partners.