FDI drops again amid slowdown (2)

Investment from the United States fell 20 percent year-on-year in January to $270 million while Japanese investment, $640 million, was down 20 percent from a year earlier, according to the ministry.

"Tension over Diaoyu Islands drove down Japanese investments in China. US investors are returning home and favor Mexico more than China where costs keep rising," Song said.

However, European Union investment in China surged 81.8 percent year-on-year in January to $820 million.

Two countries in particular stand out. Investment from Sweden jumped a massive 4,060.4 percent year-on-year and investment from Denmark rose 325.2 percent.

"The rebound of EU investment in China is mainly owing to China's continued economic expansion and the necessity to invest in production facilities close to the market," said Fredrik Erixon, director of the European Center for International Political Economy, a think tank in Brussels.

Arnaldo Abruzzini, secretary-general of Eurochambers, added that EU business has been eyeing the Chinese market for more two than decades and now smaller companies think that the time is ripe to invest.

Lian said that China's economic recovery will further stabilize after the first quarter and FDI inflow is "very likely" to pick up in the second half of 2013.

Meanwhile, China's non-financial outbound direct investment rose 12.3 percent to $4.91 billion in January.

"China is at a stage of fast outbound investment and the pace will be faster in the near future. Outbound investments currently focus on resources and mergers and acquisitions, but more will go to manufacturing as China shifts its over capacity to overseas markets," Song said.