The amount of money flowing into China's economy slowed to the lowest level in nearly six years in July, adding to fears that a sustained recovery may be at risk in the second half of the year despite government efforts to shore up growth.
Both the central bank and economists had expected some payback in July after unexpectedly strong financing data in June, but new loans and money supply growth were far below economists' expectations.
China's total social financing (TSF) aggregate, a broad measure of liquidity in the economy, fell to 273.1 billion yuan ($44.34 billion) in July, about one seventh of that in June and the lowest monthly reading since October 2008 in the depths of the global financial crisis.
The People's Bank of China took the unusual step of issuing a statement immediately after the data, reassuring markets that credit and financing growth was still reasonable and that it had not changed its monetary policy.
Still, it conceded the slowing economy, and in particular the cooling property market, were dampening loan demand and highlighted the risks of pumping too much money into a softening economy too quickly, citing the growing number of bad loans.
Non-performing loans have now risen for 11 straight quarters, the central bank's statement said.
"It's surprising. On the face of it, we've not observed any tightening of monetary conditions by policymakers," said Louis Kuijs, an economist at Royal Bank of Scotland in Hong Kong.
"I don't know if this has anything to do with disagreements between policymakers. In its recent monetary policy report, the central bank warned of continued risks in fast credit lending."
Chinese banks made 385.2 billion yuan ($62.53 billion) worth of new yuan loans in July, down sharply from 1.08 trillion yuan in June and well below expectations of 727.5 billion yuan, central bank data showed on Wednesday.
The People's Bank of China said in its second quarter policy report earlier this month that it will maintain reasonable growth in credit and social financing and fine-tune its monetary policy in a timely way.
But it also sounded a cautious note by saying that bank credit is already too large and it needs to be mindful of inflationary risks.
That echoed analysts' concerns about how much of June's loan surge was going into real economic activity and how much may be going into speculative activities.