The entrance to the Chinese Ministry of Commerce in Beijing. (Xinhua/Li He)

The novel coronavirus (COVID-19) outbreak is likely to drag down growth in China's foreign direct investment (FDI) in the first quarter to less than 1 percent year-on-year, but there is likely to be a quick rebound starting in the second quarter, thanks to robust domestic demand and foreign investors' confidence toward China's growth potential.

China's non-financial FDI rose 4 percent year-on-year to 87.57 billion yuan ($12.6 billion) in the first month, maintaining last year's stable growth momentum, the Ministry of Commerce (MOFCOM) said on Monday. A total of 3,485 foreign-funded enterprises were established during the period.

In January, foreign investment in the high-tech industry saw a large rise as FDI hit 31.35 billion yuan, an increase of 27.9 percent on a yearly basis, accounting for 35.8 percent of the country's total FDI during the period, MOFCOM data showed.

Investment from countries and regions along the Belt and Road Initiative (BRI) routes increased 31.3 percent in January, and FDI from ASEAN members rose by 44.8 percent.

The epidemic did not exert an obvious impact on foreign investment in China in the first month because the virus did not attract much public attention until January 20, said Dong Shaopeng, a senior research fellow at the Changing Institute for Financial Studies at the Renmin University of China.

Dong forecast that FDI in China will show relatively large month-on-month drops in February and March due to the spread of the COVID-19.

"China's FDI is likely to decline on a monthly basis in the first quarter and seems poised to record less than 1 percent growth year-on-year during the same period," Dong told the Global Times on Monday. 

In the same period last year, the growth rate was 3.7 percent year-on-year, according to the MOFCOM.

"But there would be quick rebound in foreign investment in the country in the second quarter thanks to robust domestic demand and the large growth potential in the market," Dong noted.

Given uncertainties in world markets, foreign companies would not give up China since they do not see the epidemic, a short-lived black swan event, as the decisive factor affecting their investment in the large Chinese market, Liang Haiming, chairman of the China Silk Road iValley Research Institute, told the Global Times on Monday.

Liang forecast that starting in April, foreign investors - from countries and regions along the routes of BRI - in particular, will further increase their investment in domestic industries such as finance, fintech and innovative technology. 

Dong said that sectors like advanced manufacturing and healthcare services will also become favored by foreign capital.