While Beijing's move on Saturday to cut bank reserve ratios to 20 percent is seen as boosting lending capacity by about 400 billion yuan, many analysts have said that the government needs to roll out more aggressive fiscal response to bolster its sagging economy, Reuters reported.
According to Jim Antos, who covers Chinese banks for Mizuho Securities, continued weakness in credit demand shows that the economy is “faltering.”
“It's clear from recent macro data releases that the mainland economy is starting to slump,” Antos said. “It just seems there is less money sloshing around the system in China now compared to the past few years. When the velocity of money slows, an economy is faltering.”
In a report issued earlier this month, Mike Werner, Senior Analyst at Sanford Bernstein pointed to weak loan growth in the month of April, describing it as “disappointing”.
New loans in April grew 8 percent from a year earlier to 682 billion yuan, lower than the 13 percent increase the market was expecting, Werner wrote.
By CNBC’s Jean Chua
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