BEIJING China's foreign direct investment inflows fell last year for the first time since the global financial crisis, slipping 4 percent as a troubled world economy curbed investor enthusiasm for deals in emerging markets.
But China still drew $111.7 billion worth of foreign direct investment (FDI) in 2012 -- just shy of 2011's record $116 billion and retaining its spot as one of the world's top destinations for corporate expansion.
FDI is an important gauge of the global economy to which China's vast factory sector is oriented, though it is a small contributor to China's overall capital flows compared with exports, worth about $2 trillion in 2012.
Analysts said China's cooling FDI growth does not suggest investor confidence in the country is waning. Rather, it shows China needs another catalyst to drive inflows after the boost from joining the World Trade Organisation hit a natural plateau.
"We will see FDI bouncing around $110 billion to $120 billion for some years," said Tim Condon, an economist with ING in Singapore. "Hopefully, the current administration is going to intensify reform efforts such as opening of the capital account. That could be momentous in terms of attracting more FDI."
A new government led by incoming President Xi Jinping is set to take over from March and investors are hoping Beijing will pursue delayed reforms, including relaxing capital account controls, to drive China into the next stage of growth.
Data on Friday is expected to show China's annual economic growth rebounded to 7.8 percent in the fourth-quarter of 2012 from 7.4 percent in the third -- the weakest pace of expansion since the depths of the financial crisis in early 2009.
In December, FDI into China fell 4.5 percent on the year to $11.7 billion, the Commerce Ministry said at a briefing on Wednesday.
China joined the World Trade Organisation in November 2001 and FDI inflows have more than doubled since. OECD data shows China rivals the United States to be the world's top FDI destination, with the United States pulling ahead of China by a slim margin in 2011.
MANUFACTURING, PROPERTY DRAG
Beijing has said it wants to attract $120 billion worth of FDI each year between 2012 and 2015, though it missed its target last year and did not comment on the FDI outlook on Wednesday.
Shen Danyang, a spokesman from the Commerce Ministry, acknowledged that China has to try harder to woo foreign investors, without elaborating.
But he stressed foreign funds were not leaving in a big way.
"It is true that some manufacturing companies are moving out of China," Shen told reporters. "But one point I want to remind you is that, so far, there is no big-scale pull-out of foreign investment."
Data showed European and Asian firms cut their Chinese investment by the widest margin, even though Asia remained by far China's biggest foreign investor.
Inflows from the crisis-stricken European Union dropped 3.8 percent in 2012 from a year ago to $6.1 billion, while FDI from the top 10 Asian economies -- including Hong Kong, Japan and Singapore -- fell 4.8 percent last year to $95.7 billion.
That contrasted with investment from the United States, which rose 4.5 percent on the year to $3.1 billion.
For the second consecutive year, FDI into the services sector trumped that of the manufacturing industry, where a global export slump has dented inflows.
Data showed FDI into the services industry fell 2.6 percent to $53.8 billion, while manufacturing inflows dropped 6.2 percent on the year to $48.9 billion.
Excluding investment in the property sector, however, FDI into the services sector rose 4.8 percent in 2012 from 2011.
Investment in the property sector had declined 10.3 percent on the year, as Beijing's three-year crackdown on housing speculation took a toll on sentiment.
Echoing widely-held views that China's exporters face a tough year ahead, Shen said the trade outlook was "severe" though Beijing will try its best to have exports growth keep pace with broader economic growth.
"Our 2013 target is to try to make trade grow at basically the same pace as gross domestic product growth and to increase China's market share in global trade," he said.
The FDI data followed a stronger-than-expected rebound in exports and imports last month, though the country missed its 10 percent growth target for trade in 2012, underlining the downside risks from the faltering external demand.
To shield China's economy from external uncertainties, Beijing has taken steps to help exporters and importers by speeding up payments of tax rebate, cutting red tape and giving exporters easier access to bank loans.
($1 = 6.2192 Chinese yuan)
(Editing by Alex Richardson)