Lending by State owned banks is an important source of aggregate demand.

With lending both down and front loaded, a moderate first half could be a prelude to a very weak second half.

China’s Bank Lending Cools, Easing Overheating Risks

April 12 (Bloomberg) — Chinese banks extended a less-than- estimated 510.7 billion yuan ($74.8 billion) of new loans in March after the central bank told lenders to set aside bigger reserves and pace credit growth.

The figure compares with 700 billion yuan in February and the median forecast of 709 billion yuan in a Bloomberg News survey of 21 economists. The central bank released the latest data on its Web site today.

Lending Spurt

First-quarter new lending was 35 percent of the government’s full-year target of 7.5 trillion yuan, partly because Chinese banks lend more at the start of each year. March lending was down from a monthly record of 1.89 trillion yuan a year earlier. In the first three months of 2009, lending was 48 percent of the year’s total.

Meantime, a smaller trade surplus in the first quarter — down 77 percent from a year earlier at $14.49 billion — capped the increase in the nation’s foreign-exchange holdings. Li Wei, a Shanghai-based economist at Standard Chartered Bank Plc, said the U.S. currency’s strength last quarter reduced the value in dollar terms of reserves held in currencies such as the euro.