China's foreign direct investment increased for a second consecutive month in March in a sign that investor confidence in the world's second largest economyis gaining ground, as global financial conditions improve.

Investment inflows increased 5.65 percent year-on-year to $12.4 billion in March, the Commerce Ministry said Thursday. In February, China attracted $8.2 billion in FDI, which was 6.32 percent higher than a year earlier.

Investment totaled $29.9 billion in the first quarter, up 1.44 percent from the same period last year. Outbound investment by Chinese non-financial firms increased 44 percent to $23.8 billion, the ministry said.

Nonetheless, a slew of economic indicators released earlier this week pointed to weaker growth momentum.

China's economic growth slowed in the first quarter of 2013 after accelerating for the first time in two years in the fourth quarter of 2012. The gross domestic product expanded 7.7 percent in the last quarter, the National Bureau of Statistics said Monday.

International agencies have indicated that the economy is likely to grow at a slower pace than earlier predicted. The International Monetary Fund cut its 2013 growth forecast for China this week to 8 percent from the 8.2 percent forecast previously. The outlook for 2014 was lowered to 8.2 percent from 8.5 percent.

The World Bank cut its 2013 growth outlook for the economy to 8.3 percent from the previously projected 8.4 percent. Chinese GDP is set to expand 8 percent in 2014, according to the World Bank report.

The Asian Development Bank expects China to grow 8.2 percent this year on the back of rising domestic demand and improved exports. However, the growth is seen edging back slightly to 8 percent in 2014, as the government moves to cool pressure on the environment and to address income inequality.

The government aims to achieve 7.5 percent GDP growth this year after a slowdown in growth to a 13-year low of 7.8 percent in 2012.

This week, Moody's Investors Service downgraded China's credit outlook to stable from positive, saying the progress made in reducing risks associated with local government debt and rapid credit growth was less than expected. Nonetheless, the agency affirmed its bond ratings at Aa3.

Last week, Fitch Ratings downgraded China's long-term local currency rating to 'A+' from 'AA-' with a 'stable' outlook, saying that risks to China's financial stability have grown with further increase in local government indebtedness.

RTTNews