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

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

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