(Bloomberg) -- China’s credit expansion continued to slow in March and banks extended less loans than expected, reflecting still-weak borrowing demand as the central bank refrained from easing monetary policy.

The stock of aggregate financing, a broad measure of credit, expanded 8.7% from a year ago, the slowest pace on record since the data began in 2017. Financial institutions offered 3.1 trillion yuan worth of new loans, according to Bloomberg calculations based on data released by the People’s Bank of China on Friday, less than the 3.6 trillion yuan predicted by economists. The growth of the loans was the lowest pace since data began in 2003.

March is traditionally a strong month as banks race to meet quarterly lending targets. But consumers and businesses have become reluctant to borrow amid a prolonged property downturn and a bumpy transition toward new growth drivers. China has also experienced weak price growth across its economy in recent months, which dampens the pace of loan growth.

The dip in financing growth “points to tepid credit demand, hit by waning new home sales and a probable tailing off of consumer spending after the Lunar New Year holiday boost,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.

The growth rate of China’s M1 money measure, which covers cash and deposits used for immediate transactions, fell to 1.1% in March, the lowest in more than two years. M2, which includes more savings deposits, expanded 8.3%, the least since Sept. 2021.

A measure of loans to non-bank financial institutions, which surged in February and which analysts linked to the injection of state funds into the stock market, fell over the month for the first time since November.

Medium and long-term loans to households, a proxy for mortgages, increased in March following a contraction the previous month, suggesting some improvement in home purchases.

A number of Chinese state banks are making their strongest effort yet to encourage credit officers to approve loans for developers, Bloomberg reported earlier, as Beijing tries to speed up lending to the sector.

The PBOC has pledged to ensure credit grows rapidly this year, though it refrained from further easing of headline monetary policy tools in March as depreciation pressure on the yuan deepened. Officials signaled recently that they’re satisfied with the current pace of credit expansion, which is well above the nominal economic growth rate of 4.6% recorded for last year.

China’s economy showed signs of recovery recently, with some economic data beating expectations. Manufacturing activity expanded in March for the first time in six months, while tourism spending also rebounded. 

Still, with trade tensions rising and the real estate slump proving hard to reverse, Beijing faces a challenge to hit its target of around 5% economic growth this year. China’s exports slumped in March, data released on Friday showed, dealing a blow to hopes that booming sales abroad will offset weak demand at home.

The net increase in aggregate financing was 4.9 trillion yuan, according to Bloomberg calculations, slightly higher than the 4.7 trillion yuan growth forecast by economists in a Bloomberg survey but down from the increase a year earlier.

(Updates with analyst comment and more details)

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