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China's outbound direct investment rose 8.5 percent to $74.7 billion in 2011, slowing from the year before, government data showed on Thursday, but extending a decade-long expansion streak as domestic firms are officially encouraged to venture abroad.

Annual growth in 2011 marked a sharp slowdown from an annual increase of 22 percent the previous year.

China has been prodding local firms to invest in natural resources abroad and to acquire foreign technology, which helps reduce international payments surpluses and slows the build-up of foreign exchange reserves.

Chinese outbound investment grew an annual average of 45 percent between 2002 and 2011, according to figures jointly released by the Ministry of Commerce, State Administration of Foreign Exchange and National Bureau of Statistics.

Among the total outward capital flows, investment by non-financial companies reached $68.6 billion in 2011, rising 14 percent from a year earlier, the commerce ministry said. That is up from the preliminary $60.1 billion figure released in January.

In contrast, investments by financial institutions dropped 29.7 percent to $6.1 billion during the same period, as the festering European debt crisis exacerbated the volatility in the global financial market, official data showed.

"Compared with non-financial companies, many countries have laid some restrictions on foreign investments into their financial sector," Wang Chunking, a director of the State Administration of Foreign Exchange, told a news conference.

The government is targeting a total of $560 billion in outbound foreign direct investment in the five years to 2015.

In 2011, developing countries were the biggest recipients of China's investments, which attracted $61.2 billion of Chinese capital and accounted for 82 percent of China's total outbound investment.

China's direct investments to Southeast Asia climbed 34 percent to $5.9 billion, while that to European countries rose 27 percent to $7.6 billion.

China's outward investments in 2011 accounted for 4.4 percent of total investment by all countries and regions across the globe. China ranked the 6th largest country in new outbound investment in 2011.

China's capital and financial account swung into a deficit of $71.4 billion from a surplus of $56.1 billion in the first quarter.

This article is copyrighted by Reuters