Foreign direct investment in China fell to the lowest level intwo years in July, fueling concern that waning confidence in thenation's growth prospects may restrain any economic rebound.

Investment declined 8.7 percent from a year earlier to $7.58billion, the eighth drop in nine months and the smallest inflowsince July 2010. The Ministry of Commerce released the data at abriefing in Beijing today.

Chinese financial institutions sold a net 3.8 billion yuan ($600million) of foreign currency last month, indicating capital isflowing out as property curbs and weakness in exports slow growthand the yuan weakens. Premier Wen Jiabao stoked speculation thatthe government may cut banks' reserve requirements to support theeconomy when state media reported yesterday that he saw room toadjust monetary policy.

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