Employee counting Chinese yuan notes in a bank
Employee counting Chinese yuan notes in a bank

Foreign direct investments to China eased in the first two months of 2013, underscoring the continued weak external conditions that have hurt investor confidence.

According to data from the country's Ministry of Commerce, FDI inflows eased 1.35 percent year-on-year in January and February to $17.5bn (£11.5bn, €13.5bn).

Inflows from the European Union rose 34 percent year- on- year to $1.2bn while those from US fell 5.4 percent. FDI from major Asian economies eased as well, by 1.3 percent.

Manufacturing sector FDI eased 10.6 percent from the same period in the previous year, but service sector inflows improved 5.5 percent.

In February alone, FDI picked up 6.3 percent to $8.2bn, but analysts have pointed out that the data could be subject to seasonal distortions due to the Lunar New Year holidays.

Although FDI accounts for a small part in the country's overall foreign inflows in comparison to exports, it is a key barometer of overseas financial health, which is crucial to China's economy.

The latest data follows upbeat February export figures which reinforced hopes that China is well on track to recover from its recent economic slump.

It also comes as China's new government seeks to push Chinese economy forward, with plans to raise the number of middle-income citizens that could help boost domestic consumption. The administration is also looking to open the economy to market forces and reduce state control.

FDI inflows to China have soared ever since the country joined World Trade Organisation in 2001and the country is rivalling the US as a top investment destination. Analysts suggest that foreign interest in the country could continue as the economy gathers momentum.

"China's attractiveness remain for foreign investors, from its relatively-developed infrastructure to stable macroeconomic growth," Sun Junwei, a Beijing-based economist with HSBC Holdings Plc told Bloomberg.

"As the global economy recovers, China may continue to see a steady inflow of investments this year, helping the overall China recovery story."

In 2012, China's FDI stood at $111.7bn, marking an annual drop for the first time in three years, but remaining close to the $116bn recorded in 2011. Beijing had indicated that it wants to boost FDI inflows to $120bn per year from 2012 and 2015.