BEIJING (Reuters) – New bank loans in China rebounded in May as policymakers urged lenders to support smaller companies struggling with weak demand at home and mounting export pressure from U.S. tariffs.

Chinese banks extended 1.18 trillion yuan ($170.7 billion) in net new yuan loans in May, up from 1.02 trillion yuan in April, data released by the People’s Bank of China (PBOC) showed on Wednesday, but the amount fell short of market expectations.

Analysts polled by Reuters had predicted new loans would rise to 1.225 trillion yuan.

Household loans, mostly mortgages, rose to 662.5 billion yuan in May from 525.8 billion yuan in April, while corporate loans rose to 522.4 billion yuan in May from 347.1 billion yuan a month earlier, the data showed.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 10.6% in May from a year earlier from 10.4% in April.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In May, TSF rose to 1.4 trillion yuan from 1.36 trillion yuan in April.

Broad M2 money supply in May grew 8.5% from a year earlier, below estimates of 8.6% by analysts polled by Reuters, and unchanged from April’s pace.

Outstanding yuan loans grew 13.4% from a year earlier. Analysts had expected 13.5%, unchanged from April’s pace.

The PBOC stepped up efforts to increase loan growth and business activity in May, announcing a three-phase cut in regional banks’ reserve requirements to reduce financing costs for small and private companies.

It has now delivered six RRR cuts since early 2018.

Further cuts in banks’ reserve requirements are expected this year, especially after an escalation in the U.S.-China trade war last month, when both sides hiked tariffs on each other’s goods and Washington threatened more.

Concerns are rising about financial risks, with corporate defaults on track for another record year and money markets jolted by the first state takeover of a bank in two decades.

Regulators seized control of Inner Mongolia-based Baoshang Bank. While the PBOC said it was an isolated case, the move highlighted strains on some smaller banks, which are being asked to expand lending while suffering from deteriorating asset quality, inadequate capital buffers, and poor internal controls.

Beijing’s push to shore up economic growth pushed a key debt ratio to the highest level since 1993 in the first quarter, Caixin magazine reported recently, citing a study by two think tanks: the National Institution for Finance & Development and the Institute of Economics, under the Chinese Academy of Social Sciences.

China’s ratio of outstanding debt in the real economy to nominal GDP increased to 248.83%, up 5.1 percentage points from end-2018, the study showed. Debt levels had moderated somewhat in the last few years due to a government clampdown on risk.

Despite a flurry of growth measures since last year, domestic demand remains sluggish. Factory activity contracted in May, and data on Monday showed imports slumped the most in nearly three years.

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