China credit demand weakens in fresh sign of waning recovery

China credit demand weakens in fresh sign of waning recovery

China’s credit demand weakened in May as the economy’s recovery lost steam, adding to reasons for the central bank to boost stimulus to spur growth.

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Aggregate financing, a broad measure of credit, was 1.6 trillion yuan ($224 billion) in May, the People’s Bank of China said Tuesday, lower than the median estimate of 1.9 trillion yuan in a Bloomberg survey of economists.

Financial institutions offered 1.4 trillion yuan worth of new loans in the month, also missing economists’ forecasts of 1.6 trillion yuan. Both of the figures declined compared with the same month a year ago.

A string of economic reports show China’s economic recovery lost momentum in May: inflation remained close to zero, manufacturing activity contracted, exports shrank for the first time in three months and a rebound in home sales has slowed.

Private investment stagnated in the first four months of the year despite a rapid expansion in money supply.

The data came after the PBOC surprised markets Tuesday morning with a cut to its short-term policy interest rate, a sign that officials are increasingly concerned about faltering growth. Speculation about further monetary easing rose following the move.

The disappointing figures