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China January foreign direct investment rises in sign of confidence

People stand outside a UNIQLO shop in Beijing, August 24, 2013. REUTERS/Petar Kujundzic
People stand outside a UNIQLO shop in Beijing, August 24, 2013. REUTERS/Petar Kujundzic

BEIJING (Reuters) - China drew $10.76 billion in foreign direct investment (FDI) in January, up 16.1 percent from a year earlier, the Commerce Ministry said on Tuesday, a sign that confidence in the world's second-largest economy remains firm even as growth cools.

The majority of the new investment, some $6.33 billion, went into China's services industry, while investment in manufacturing fell 21.7 percent, the ministry said.

Ministry spokesman Shen Danyang told a media briefing that China's economic reforms and opening up of the services sector, helped boost confidence of foreign investors.

"The double-digit growth in FDI in January answered the question of whether China's investment environment remains favorable," Shen said.

"We expect foreign direct investment to maintain sound momentum this year."

China has shifted its focus on attracting FDI inflows to high-end manufacturing, a modern services sector and energy saving and environmental industries, Shen said.

FDI in China's distribution services sector rose 7.4 percent in January from a year earlier, while FDI in the telecommunications equipment and computer sector rose 9.2 percent and that in the transportation equipment sector tumbled 62 percent.

China has attracted a steady flow of foreign investment every year since joining the World Trade Organization in 2001, as businesses jumped at the chance to enter the world's most populous country.

FDI inflows into China in 2013 rose to a record $117.6 billion.

In January, investment from 10 Asian countries and regions, including Hong Kong, Taiwan, Japan and South Korea, rose 22.2 percent to $9.55 billion. Investment from the United States rose 34.9 percent to $369 million while that from the European Union fell 41.3 percent to $482 million.

The investment comes even as China's economy show signs of slowing from the stellar growth rates of years past as the government looks to shift the emphasis to structural reform rather than growth for its own sake.

One pillar of the reform drive is to make the economy driven more by the service sector and consumers, ending its traditional reliance on investment and exports for growth.

CHINA INC EXPANDING ABROAD

At the same time, the ministry's data showed more Chinese companies are expanding abroad. Outbound FDI in January was $7.23 billion, up 47.2 percent from a year earlier.

The rise in outbound FDI in January was led by a 500 percent jump in investment in Japan, the ministry said without elaborating.

Chinese firms have been quickening the pace of overseas purchases in recent years, with their footprint expanding from Asia to Africa and Europe.

In January alone, computer maker Lenovo Group spent over $5 billion on two high-profile acquisitions in the United States [ID:nL3N0LH3UU].

Ministry spokesman Shen also played down the impact of fake export deals in China's strong trade performance in January, which he attributed to a recovery in developed economies and favorable policies.

"Some individual analysts believe that the rapid export growth was driven by falsified deals. We think that's just a guess, which is unfounded," he said.

The value of China's exports climbed 10.6 percent in January from a year earlier, more than five times market forecasts for a 2 percent rise. Some market watchers suspected the figures were inflated by fake trade deals which firms used to sneak cash into the country past capital controls.

China's total trade grew 7.6 percent in 2013, below the official target of 8 percent.

The Commerce Ministry has pledged to maintain steady trade growth in 2014 and further balance its trade structure by increasing imports of raw materials and energy products.

(Reporting by Kevin Yao; Writing by Jonathan Standing; Editing by Kim Coghill)

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