Almost half of the venture funding to China's startups in the third quarter went to consumer and business services companies, a new report says.

Overall venture capital investment to China climbed 5 percent versus the 2006 quarter as 59 deals yielded $677 million, according to a study released by Ernst & Young and Dow Jones VentureOne.

Fourteen deals in consumer and business services drew $335.5 million, or almost half of the total spent. Funding levels for the industry segment were 242 percent higher than those in the third quarter of 2006.

The statistics reflect a broader trend worldwide, said Bob Partridge, Ernst & Young's China and Far East venture capital advisory group leader.

"What we're seeing in mainland China is a continuation of a global trend for venture capital investors to back service-focused deals, reflecting the fast growth in China's middle class, which increasingly consumes more services," he said in a statement.

The quarter's banner deal was the $25 million late-stage round funding of RedBaby, a Beijing-based online children's retailer that is backed by New Enterprise Associates and other VCs.

The second strongest industry segment was information services, which notched up $106.1 million in 13 deals, down from $166.7 million in 27 deals in the prior year's quarter. Still, funding of information services companies  amounted to almost half of the quarter's $217 million devoted in 24 information technology investments.

The $1.7 billion total raised by Chinese companies through three quarters put the industry on pace to eclipse the $2.4 billion in total fundings for all of 2006.

The report was released in the wake of news earlier this month that Internet hardware maker Cisco Systems plans to spend $16 billion in procurement, education, research, and joint ventures in China.

On Tuesday, Washington-based private equity firm  Carlyle Group said it plans to redouble its efforts to gain a foothold in China, according to reports.

The venture capital report found that 35 of the 59 deals recorded in the third quarter were first-round deals, accounting for $240.6 million.