China's new bank loans for May showed a slowdown from April, though the drop indicates only a marginal tightening of credit. Beijing is attempting to cut back on credit expansion, but cutting back too suddenly could slow down the economy. Finding the middle ground on lending is only one challenge Beijing faces as it attempts to reduce social tensions by dampening inflation without harming growth.
China's new bank loans for May showed a slowdown from April. In May, the country's mostly state-dominated banking sector extended about 551.6 billion yuan, or about $85 billion, in new yuan-denominated loans, down from 739.6 billion yuan in new loans in April.
But the drop in new loans suggests a marginal rather than a sharp tightening of credit. And even as China considers raising interest rates further and implementing other measures to tighten credit, new risks to growth are emerging that will challenge the leadership's resolve in combating inflation.
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