CHINESE banks extended 985.5 billion yuan (US$149.56 billion) in new yuan loans in May, exceeding analysts’ expectations and well above the previous month’s levels, as the central bank keeps policy accommodative to support the slowing economy.

    The central bank has pledged to keep policy slightly loose to support activity, even after an article in the People’s Daily in May quoted an “authoritative person” as warning that China may suffer a financial crisis or recession if the government relies too much on debt-fuelled stimulus.

    Economists polled by Reuters had expected new loans would climb to 750 billion yuan last month, from a six-month low of 556 billion yuan in April.

    The central bank also said yesterday that broad M2 money supply (M2) grew 11.8 percent from a year earlier, down from April’s 12.8 percent. Analysts had expected May growth of 12.5 percent.

    Outstanding yuan loans grew 14.4 percent by month-end on an annual basis, versus expectations of 14.2 percent.

    Banks doled out a record 4.6 trillion yuan in new loans in the first quarter, but levels in April were much lower than expected, adding to fears that the government was taking a more cautious approach on stimulus.

    The economy has shown some signs of steadying in recent months but remains uneven, and analysts believe continued fiscal and monetary support is needed to support growth.

    Data on Monday showed growth in China’s fixed-asset investment has slipped below 10 percent for the first time since 2000 while investment by private firms slowed to a record low, raising the possibility that the government may have to ramp up fiscal stimulus further, even if that adds to concerns about mounting debt.

    The economy grew 6.7 percent in the first quarter from a year earlier, the slowest since the global financial crisis.

    The PBOC is aiming for annual M2 growth of around 13 percent this year, pointing to continued accommodative policy as the government pledges to embark on a painful economic restructuring that could throw millions of people out of work.

    Total social financing (TSF), another important indicator of China’s credit expansion, fell to 659.9 billion yuan in May from 751 billion yuan in April.(SD-Agencies)