CHINA announced fresh support measures Friday for its slowing economy after data showed a worrying drop in bank lending and foreign investment growth falling to a two-year low.

    The central bank said it would lend 50 billion yuan (US$8.06 billion) to banks at discounted rates to allow them to re-lend the money to farmers and small businesses — areas of the economy that are usually short of cash.

    The latest attempt to ease policy in a “targeted” manner to help the most vulnerable sectors came as data showed that foreign direct investment (FDI) in China rose just 1.7 percent in 2014, the slackest pace since 2012.

    The world’s second-largest economy drew a record US$119.6 billion worth of FDI last year, slowing markedly from growth of 5.3 percent in 2013, the Ministry of Commerce said.

    “The priorities of macro policy this year is to let the economy shift its gears without losing its growth speed,” said Zhu Zhixin, a deputy director at the country’s top economic planner, the National Development and Reform Commission (NDRC).

    “We expect this kind of targeted easing to continue,” said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. “We expect three cuts in the reserve requirement ratio (RRR) this year, totaling 150 basis points.”

    The downbeat investment report came a day after data showed Chinese banks issued far fewer loans in December than expected.

    That suggested a surprise interest rate cut in November, the first in over two years, has not spurred demand for credit, and that banks remained reluctant to lend.

    Lu from Bank of America-Merrill Lynch said he believed RRR cuts are imminent because bets for a weaker yuan this year have led fewer firms to sell their dollars to the central bank for yuan, thereby reducing the supply of yuan and liquidity in the market. (SD-Agencies)