Foreign direct investment into China's nonfinancial sector is expected to increase by 4 percent year-on-year to $125 billion this year, officials said on Friday.

Nonfinancial FDI into China rose by 8 percent year-on-year to 420.52 billion yuan ($68.41 billion) in the first half as global companies pursued a larger share of the country's lucrative market, the Ministry of Commerce reported.

Wang Shouwen, vice-minister of commerce, said this helped to boost the high-end manufacturing industries and the service sector.

"The service industry has become the country's main engine to attract FDI, as companies from the United States, Europe and Singapore, eager to diversify their investments, have looked to the sector, especially service outsourcing businesses," Wang said.

FDI into China's service industry increased by 23.6 percent year-on-year in the first half. This accounted for 63.5 percent of total FDI during the period.

In the high-end industries, FDI growth in the telecommunications sector climbed by 231.6 percent, while growth in the chemicals sector increased by 71.9 percent and the electronic device sector by 23.6 percent.

"Many global investors shifted their investment focus from building factories in China to acquiring local companies between January and June," Wang said.

"This change will not only improve the technical capabilities of local companies, but also offer them new opportunities to sell their products to overseas destinations."

In the past six months, 641 foreign companies carried out merger and acquisition activities in China worth a total of $13.19 billion, up 336 percent compared with the same period last year. The number of foreign companies involved represents a 21.2 percent increase year-on-year.

International companies including General Electric, Robert Bosch and Daimler invested $2.57 billion in 795 new research and development facilities in China. This indicates a belief that consumption levels will remain higher in China than in other parts of the world, particularly in the automobile manufacturing, new materials and healthcare industries.

Fang Aiqing, vice-minister of commerce, said that the country will continue to promote the development of the commerce and logistics sectors to speed up job creation and consumption.

"Efforts will be made by the authorities to improve the business environment for these companies, including simplifying administrative approval procedures and tax burdens," said Fang.

"It is necessary to establish a highly efficient logistics and distribution system to meet the needs of the e-commerce and information era."

Efforts to open up a wide range of service sectors have already been made by governments at all levels. Foreign companies were allowed to establish joint-venture hospitals with local partners this year, while investment from Hong Kong and Macao can be used to run hospitals independently in selected Chinese cities.

Lin Guijun, vice-president of the University of International Business and Economics in Beijing, said the government should encourage foreign companies to merge with more Chinese enterprises through public-private partnership reforms.

zhongnan@chinadaily.com.cn