SHANGHAI stocks fell yesterday on worries China's slowing economy is worsening as credit demand weakened again in May, while the World Bank cautioned the country's slowdown is hurting expansion in East Asia.

The Shanghai Composite Index shed 0.42 percent to 2,363.44 points yesterday, after climbing for two straight days.

The Shanghai index has fallen 4 percent from this year's high set on March 2 on concern a slowdown in growth at the world's second-largest economy is deepening and on fears Greece may leave the eurozone.

"Sentiment is still weak as investors are shunning risk assets to avoid contagion from Europe," said Wang Weijun, a strategist at Zheshang Securities Co in Shanghai. "It's a bit hard to reverse the risk-averse sentiment at this moment."

China's economic growth may fall to 6.4 percent this year if Greece exits the eurozone, Peng Wensheng, an economist at China International Capital Corp, wrote in a report. Europe is China's biggest export market.

A World Bank report also said yesterday that East Asia's annual growth will ease to 7.6 percent due to the global slowdown, and the slower expansion in China may pull down the region as well.

China's four biggest banks - the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China and China Construction Bank - lent only a combined 34 billion yuan (US$5.4 billion) in the first 20 days of May, the 21st Century Business Herald said yesterday. Their lending usually accounts for more than 50 percent of the industry's total.

New yuan loans fell to 681.8 billion yuan last month from 1 trillion yuan in March, data published by the central bank showed.

ICBC, the nation's biggest lender lost 1.2 percent to 4.18 yuan, AgBank dipped 0.4 percent to 2.65 yuan and CCB shed 0.9 percent to close at 4.50 yuan.

Source:shanghaidaily