China's new local-currency loans exceeded estimates last month while money supply expanded at a faster pace, as policy makers maintained credit support for the economy after first-quarter growth unexpectedly slowed.

Lending was 792.9 billion yuan ($129 billion) in April, the People's Bank of China said today in Beijing, compared with the median estimate of 755 billion yuan in a Bloomberg News survey. M2 money supply rose 16.1 percent from a year earlier, following March's 15.7 percent advance.

Inflation that's run below the government's annual goal every month this year has allowed the central bank to keep credit flowing as a recovery in the world's second-biggest economy threatens to falter. At the same time, the lending growth and expansion of so-called shadow banking may increase risks in the financial system that new leaders including President Xi Jinping are trying to control.

"The strong credit supply and bank loans in the first four months of this year will be sufficient to support an economic recovery through the third quarter," said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong. "Financial risks may also rise."

Aggregate financing, a broader measure of credit that includes trust loans, stock and bond sales, was 1.75 trillion yuan in April, compared with a record 2.54 trillion yuan the previous month.

The median economist forecast was for a 15.5 percent increase in money supply while the 10 forecasts for aggregate financing ranged from 1 trillion yuan to 1.8 trillion yuan, with a median of 1.5 trillion yuan.

Stocks Rise

The yuan fell 0.2 percent against the dollar in Shanghai, snapping a three-day gain. The benchmark Shanghai Composite Index, which closed before the data were released, rose 0.6 percent today.

Analysts at Goldman Sachs Group Inc., Royal Bank of Scotland Group Plc and JPMorgan Chase & Co. last month cut their estimates for China's growth this year to 7.8 percent after economic expansion unexpectedly slowed to 7.7 percent in the first quarter.

At the same time, aggregate financing was a record in the first three months and new yuan loans were the most for a quarter in almost four years, spurring concerns that faster credit isn't translating into economic growth.

Import Figures

The central bank said yesterday that it will use various tools to guide "stable and reasonable" growth in money supply and credit. "The negative spillover effects from loose monetary policy in major economies are growing, which has helped pro- cyclical credit expansion at home," the PBOC said.

The ruling Politburo Standing Committee, headed by Xi, said last month that the country must guard against financial risks and boost consumption, issuing a statement after what the official Xinhua News Agency said was a special session on the economy.

"New leaders are keen to put their house in order by preventing any small financial and debt incidents," Bank of America Corp. economists led by Hong Kong-based Lu Ting said in a note today. The banking regulator in March tightened rules on wealth-management products.

Growth Target

The government set a target for a 7.5 percent increase in gross domestic product this year and Premier Li Keqiang last month urged more efforts to improve the quality and benefits of economic growth, indicating the government is prepared to tolerate slower expansion.

Gauges of manufacturing and service industries released this month declined and a drop in producer prices deepened last month, indicating demand is softening.

"Monetary conditions are still loose," said Qinwei Wang, China economist at Capital Economics Ltd. in London, who previously worked at the People's Bank of China. More broadly, policy makers have moved toward "tightening oversight of lending through other non-traditional channels since late March, which should start to have an effect on the pace of overall credit expansion."

Today's credit data from the central bank follow a statistics bureau report yesterday showing consumer prices rose 2.4 percent in April from a year earlier, below the government's annual goal of 3.5 percent. The producer-price index fell a more-than-estimated 2.6 percent, the 14th straight drop and the longest negative streak since 2002.

Circumventing Controls

Separately today, Nomura Holdings Inc. said "surprisingly strong" import growth in the first four months may have been inflated by fake invoices as companies circumvented capital controls to move funds into China. The skepticism adds to similar doubts over the veracity of the nation's export data.

The statistics bureau is scheduled on May 13 to release data on industrial output and retail sales for April and investment for the first four months. Production probably rose 9.4 percent in April from a year earlier, compared with an 8.9 percent gain in March, based on the median analyst forecast in a Bloomberg survey. (Bloomberg)