China economy
A man casts a net by the side of a river next to a construction site of new residential buildings in Wuhan, Hubei province.Reuters

China's foreign direct investment fell to a two and a half-year low of $7.2bn in August, indicating the growth challenges for the world's second largest economy.

The FDI level was the lowest since February 2012, and down 14% from a year earlier.

The Chinese data sent the Australian dollar sharply lower shortly after the Reserve Bank of Australia minutes and a speech by a central bank official helped the currency add some points.

AUD/USD dropped to as low as 0.8989 from the previous close of 0.9028. The pair was up to 0.9056 shortly before the data.

The cumulative investment for the calendar year to August stood at $78.3bn, down 1.8% from a year earlier.

The weak investment data adds to the recent trade, industrial output and investment data all pointing to sluggish activity.

FDI is an important gauge of the health of the external economy of China, but compared to the exports sector - worth $2 trillion - it is small.

Industrial output in China had fallen to a six-year low in August, data last weekend showed. But exports are helped by the strength of global recovery, especially that of the US. It rose 9.4% y/y in August.

Among the 10 countries that were the biggest sources of China's FDI, investment from South Korea surged 31.3% on an annual basis and that from Britain leapt 18.9%, according to a Reuters report.

In contrast, investment from Japan plunged 43.3% from a year earlier while FDI from the United States and European Union dropped between 17-18% each.

China's non-financial direct outbound investment rose 15.3% in the first eight months from a year earlier to $65.2bn.