The People's Bank of China, the country's central bank, said China's broadest measure of new credit dropped 19 percent year-on-year to 2.07 trillion yuan in March while money supply grew at the slowest rate since 2001.

Economic analysts said the data highlights the risks of a deeper slowdown as the government tries to deal with financial dangers facing the economy. PBOC said M2, which measures China's money supply, increased 12.1 percent year-on-year.

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Policy makers are trying to curb a credit spree and prevent defaults from igniting a more dangerous financial turmoil. Perhaps the most worrying default scenario is that facing China's local governments whose total debt is equivalent to more than half of China's gross domestic product.

The need to meet this year's economic expansion target of 7.5 percent has forced the State Council to authorize a mini-stimulus package consisting of railway spending and tax relief for small sized enterprises.

Economist Zhang Zhiwei of Nomura Holdings Inc said the very weak deposit growth reinforces analysts' view that the central bank needs to cut banks' reserve requirements in the second quarter, else the monetary growth will continue to slow and economic growth will drop below 7 percent in the second or third quarter. 

PBOC said yuan deposits rose 3.67 trillion yuan in March compared to February, which is slower than last year's increase. Analysts said the increase in China's foreign-exchange reserves in March indicates that the yuan's weakening is a result of heavy intervention by the PBOC.

PBOC governor Zhou Xiaochuan said recently that China needs only minor policy adjustments when economic growth is within a normal range. His view reinforces that of Premier Li Keqiang who said that the government won't adopt short-term and strong stimulus policies in response to temporary fluctuations in the economy.