Sources said that the People's Bank of China (PBOC) at meetings in recent days instructed some commercial banks to accelerate the pace of lending in May after data showed that annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 8.3% in April from 8.7% in March, reaching an all-time low. The slowdown in credit growth has alarmed investors, who widely view it as a barometer of China's economic health. Meanwhile, analysts said the performance showed overall demand for financing in the economy is relatively weak.
The central bank also hinted it would be more tolerant to banks which labeled bankers' acceptances as new loans, even though the funds do not actually flow into the real economy.
The new instructions come at a time when banks are facing increasing pressure on profitability as Beijing pushes them to support the economy with cheaper loans and help the struggling real estate sector. But banks are reluctant to heed Beijing's repeated calls to increase lending to the real estate sector, given the risks of an increase in the number of bad loans.
The source also said that the Central Bank urged banks to provide more loans to support the economy, but it is expected that the new lending data for May will be even worse than in April, given weak demand for loans.