UPDATE 1-China's Jan-April FDI up 5 pct y/y, bulk is in services

Thu May 15, 2014 11:33pm EDT

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(Adds breakdown by countries, sectors)

BEIJING May 16 (Reuters) - China drew $40.3 billion in foreign direct investment (FDI) in the first four months of 2014, up 5 percent from a year earlier, with the lion's share going to the services industry, the Commerce Ministry said on Friday.

In April alone, China attracted $8.7 billion in FDI, up 3.4 percent from a year ago. But reflecting uncertainty over the global economy, China's non-financial direct outbound investment fell 12.9 percent to $25.7 billion in the first four months.

The services sector attracted $22.5 billion in investment in the four months, up 19.1 percent year-on-year, while investment inflows into the manufacturing sector dropped 11.4 percent to $14.5 billion.

Hong Kong was the top investor in China in the January-April period, putting in $27.8 billion, followed by Singapore and Taiwan with $2 billion each.

Investment from South Korea rose at the quickest pace in the first four months, surging 138.5 percent from a year ago to $1.8 billion. FDI from Japan fell 46.8 percent from a year earlier to $1.6 billion and investment from the U.S. dropped 11.4 percent to $1.2 billion.

The government wants to attract FDI to services, high-end manufacturing, and environmental industries instead of into low-value factories, and wants local firms to increase offshore investment.

In the first four months, 66.5 percent of China's outbound non-financial investment went to seven economies: Hong Kong, ASEAN, the EU, Australia, the U.S., Russia and Japan. Investment into the seven totalled $17.1 billion.

CONFIDENT ON TRADE

Separately, the ministry said that it was confident China could achieve its target of 7.5 percent growth in total trade this year, and it maintained a "cautiously optimistic view on the trade performance this year".

China announced on Thursday it was increasing its support for the trade sector with a raft of new measures, including giving more tax breaks, credit insurance and currency hedging options to exporters.

But the ministry denied that China was weakening the yuan currency to boost trade, saying that the currency's moves were decided by market supply and demand.

The yuan is a perennial lighting rod issue between China and its trade partners, who have in the past accused Beijing of deliberately holding down the currency to lift exports. China has always denied these accusations. (Reporting by Aileen Wang and Kevin Yao; Editing by Richard Borsuk)

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