Foreign direct investments (FDI) into China have increased in 2012, contrary to recent reports suggesting a decline, Capital Economics Chief Asia Economist Mark Williams said.

The economist said that latest government data showing a decline in investments in China by foreign entities do not project the country's real economic outlook, and do not imply that confidence in world's largest economy is crumbling.

Data from the government Wednesday showed that foreign direct investment into China fell around 4 percent in 2012. The data, according to Capital Economics, actually include only the portion of the investment - that registered with the Ministry of Commerce - and exclude inter-company loans and the re-investment of profits by foreign firms in China.

The firm observed that an alternative quarterly survey of China's balance of payments, which includes the components omitted in the the Commerce Ministry's survey, gives a broader measure of FDI that is in line with international norms.

The balance of payments data showed that FDI was still higher in the first three quarters of 2012 than a year before, suggesting that investment may not have fallen at all last year. However, FDI flows seem to have slowed over the past eighteen months on this series too, reflecting more the slump in global economy than in the domestic economy.

Williams, however, noted that FDI might not contribute to China's economy in any significant way, which is evidenced by the country's efforts to shift the economy away from investment by diminishing incentives to attract foreign investors.

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