The service sector will be the new focus to attract foreign investors this year, according to a senior commerce official.

"We will take the service sector as a new focus in attracting foreign direct investment (FDI) in 2007 to optimize China's foreign investment structure," Minister of Commerce Bo Xilai said yesterday at the national commerce working conference.

Official statistics showed that the service industry accounted for some 41 percent of China's total gross domestic product in 2006, compared with the global average of 68 percent.

Bo said China should use foreign investment to upgrade and reform China's service sector.

"Learning from the experience of developing China's manufacturing sector, we must cash in on the opportunities of international investment to transform the service industry," he said.

The growth of FDI in the service sector emerged as a trend last year. FDI in China, excluding financial sectors such as banks and insurance, hit $63 billion last year, an increase of 4.47 percent from a year earlier, while FDI to the service sector increased 21 percent year-on-year.

The government will also encourage foreign investment to some high-end manufacturing sectors this year by relaxing or scrapping restrictions on foreign investors' access to some industries, Bo said.

"The move is expected to attract more foreign investment to the high-end sectors and to boost the upgrade of domestic sectors," Bo said.

The Chinese government's current policies on foreign investment reflect the value it places on the quality and efficiency of foreign investment flows, rather than just the pursuit of volume, said Lu Jinyong, an investment researcher at the University of International Business and Economics.

"When considering investment, the government will look at not only the amount of capital, but also the technologies, management and experience," he said.

Some provincial and municipal governments, such as Guangdong, Zhejiang and Jiangxi provinces and Beijing, announced policies last year to encourage foreign investors to improve the quality of investments.

Since last year, the commerce ministry has not approved any foreign-invested projects in some high-polluting and high energy-consuming sectors such as steel, cement and aluminum.

China will try to attract more foreign investment in research and development centers and purchasing centers as well as in service industries such as finance and communications, Lu said.

Source: China Daily