Chinese banks cut lending in May

Chinese banks scaled back lending in May from April, the central bank said, prompting analysts to warn of threats to growth in the world's second largest economy. Banks extended 667.4 billion yuan ($108 billion) in new loans last month, less than the 792.9 billion yuan in April, the People's Bank of China said Sunday. Actual May lending was far below the 821.3 billion yuan expected in a Dow Jones Newswires poll of 14 economists. "Liquidity conditions were much tighter than expected," investment bank Goldman Sachs said in a research report on Monday. "If sustained, the tighter monetary and fiscal policy stance is likely to put downward pressure on aggregate demand growth." Goldman said its forecasts for China's second quarter and full-year gross domestic product (GDP) growth -- now both 7.8 percent -- faced "downside risk". China has already released other economic figures for May which have raised concern over the outlook for the economy, which grew 7.8 percent in 2012, its worst performance in 13 years. Among them, the country's industrial output expanded at a slightly slower pace in May while big ticket investment growth also eased, the government said Sunday, in the latest signs of weakness. Analysts expect China might have to ease monetary policy, perhaps even cutting interest rates, to put economic growth back on track.