"The government's composure so far is an encouraging sign that policymakers are still giving priority to bringing credit risks under control," said Williams.

Financial markets were unsettled by several debt default cases earlier this year, which triggered tighter regulations and credit.

Slowdown curbs Q1 lending activity

Liqudity: a thorny issue

First-quarter industrial output was weaker than financial experts had expected, and there were calls for monetary easing via a lower reserve ratio.

"As broad money supply growth in April was in line with the government's full-year target of 13 percent, pressure for the central bank to lower the reserve requirement will decrease accordingly, which means China will pursue a steady monetary policy," said Wen Bin, director of macroeconomic research at the Institute of International Finance under Bank of China Co Ltd.

Broad money supply, or M2, reached 116.88 trillion yuan at the end of April, up 13.2 percent from a year earlier and well above the consensus forecast for growth of 12.5 percent.

But Wen still said the PBOC should lower the reserve ratio to increase bank lending to small and medium-sized enterprises.

"Some of the banks' risk provisions should be used for special loans to SMEs. In this way, monetary policy will better support China's structural readjustment and the development of the real economy," Wen said.

He said that the government should give SMEs more ways to raise capital, such as by issuing bonds, at times when banks become more cautious toward lending.

AFP contributed to this story.