Money supply growth fails to maintain momentum

Hua Changchun, a China economist at Nomura Holdings Inc in Hong Kong, said in a research note: "The weak money growth data reaffirms the signal from the PMIs and ordinary imports that China's domestic demand remained weak in December.

"However, we also see tentative signs of the effects of policy easing such as benchmark rate cuts and easing of the loan-to-deposit ratio rule as credit growth improved."

With economic growth continuing to slow, the PBOC cut interest rates for the first time in two years in November.

Hua said foreign exchange reserves fell to $3.84 trillion by the end of December from $3.89 trillion at the end of September, which suggests mild capital outflows.

The PBOC data also showed that total social financing, a broad measure of liquidity designed to capture some lending outside of traditional banking, hit 16.46 trillion yuan last year and was down from the 17.29 trillion yuan recorded in 2013.

In December, total social financing jumped to 1.69 trillion yuan, compared with 1.15 trillion for November. Outstanding yuan loans increased by 13.6 percent at the end of December, compared with 13.4 percent at the end of November.

Zhu Haibin, chief China economist at JPMorgan Chase & Co, said: "Overall, the December credit data continued to suggest a shift towards more accommodative credit policy. Despite the weaker-than-expected loan figure, the fact that medium and long-term loans accounted for almost all the loan increase, the pickup in non-bank financing, and the easing in loan-to-deposit ratio calculation suggest that policymakers are encouraging bank lending to support the real economy."

Zhu expects the PBOC to adopt a mixture of traditional and new policy instruments in 2015, forecasting new loans to increase to 11 trillion yuan, or 13.5 percent, in 2015 and total social financing to hit 17 trillion yuan, or 13 percent growth.