BEIJING—Chinese banks sharply reduced lending last month after a credit surge in the first quarter raised concerns that the world’s second-largest economy was mounting an unsustainable return to debt-fueled growth.

Banks extended 555.6 billion yuan ($85.23 billion) of new loans in April, down sharply from 1.37 trillion yuan of credit issued in March, the central bank said Friday. Total social financing, a broader measure of credit, also plunged, to 751 billion yuan in April, compared with 2.34 trillion yuan in March.

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