In December, new bank lending in China declined more than predicted from the previous month, but lending for the entire year of 2021 hit a record, as the central bank maintained policy assistance to cushion the slowing economy.

According to figures issued by the People's Bank of China on Wednesday, Chinese banks extended 1.13 trillion yuan ($177.56 billion) in new yuan loans in December, down from 1.27 trillion yuan in November and falling short of analysts' estimates.

However, new bank lending reached a record 19.95 trillion yuan for the year, up 1.6% from the previous record of 19.63 trillion yuan in 2020, and equivalent to more than the UK's GDP.

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"December credit numbers were slightly weaker than predicted, but real economy financing has been improving," said Luo Yunfeng, analyst at Merchants Securities.

China's economy got off to a strong start in 2021, as activity continued to recover from a pandemic-induced slump the previous year, but it has slowed in recent months due to a property market downturn, industrial pollution curbs, and strict COVID-19 curbs, which have impacted consumer confidence and spending.

The efforts of policymakers to reduce debt risks have also had an impact on local government spending.

To shore up flagging growth, the central bank reduced the reserve requirement ratio (RRR) for banks on December 15, its second such cut in 2021, releasing 1.2 trillion yuan in long-term cash to boost business activity. 

The central bank also reduced the interest rate on its lending facility by 25 basis points (bps) to support the rural sector and small businesses.