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China April new loans down sharply, money growth also below forecast

[BEIJING] Chinese banks sharply cut back new lending in April after a record first-quarter credit spree, reinforcing views that the country's leaders have turned more cautious about the risks of over-stimulating the cooling economy.

Chinese banks extended 555.6 billion yuan (S$116.87 billion) in net new yuan loans in April, much lower than market expectations and less than half the 1.37 trillion yuan seen in March.

The central bank also said on Friday that broad M2 money supply (M2) grew 12.8 per cent from a year earlier, compared with 13.4 per cent in March.

Outstanding yuan loans grew at 14.4 per cent by month-end on an annual basis.

Analysts polled by Reuters had expected new loans of 900 billion yuan and predicted outstanding loans would rise by 14.8 per cent. Money supply was forecast to rise by 13.5 per cent.

China's outstanding total social financing was up 13.1 per cent year-on-year at the end of April.

The government is trying to arrest a prolonged slowdown in the economy, which expanded 6.9 per cent in 2015, the slowest pace in a quarter of a century. It has unleashed a flurry of fiscal, monetary and administrative measures since 2014.

But a report in official media this week, quoting an "authoritative person", warned that too much reliance on debt to kick-start activity could lead to a financial crisis or an economic recession.

Debt owed by China's state-owned enterprises (SOE) is higher than in any other rated nation and failure to curb risks from these liabilities would curb growth, lower credit availability and ultimately lead to state support, Moody's said on Tuesday.

In a report, the credit rating agencies said SOE liabilities stood at 115 per cent of gross domestic product (GDP), far exceeding levels seen in countries such as Japan and South Korea where the state sector also plays a significant role.

REUTERS