China banks issue fewer loans in Dec despite surprise rate cut

Beijing

CAUTIOUS Chinese banks issued far less credit in December than expected despite a surprise rate cut by the central bank, driving cash-starved companies into the shadow banking system in a major blow to the government's financial reform efforts.

The weaker-than-expected loan data indicates that Beijing's traditional reliance on credit to spark the economy is losing its effectiveness, posing a further challenge to policymakers as they look for ways to avert a sharper slowdown in 2015.