The central bank has cut the benchmark lending rate by 2.16 percentage points in the past four months and reduced the deposit reserve requirement ratio in order to ensure there's enough liquidity in the market to boost the economy.

The growth in lending could also prove to be a blessing for cash-strapped domestic enterprises trying to stay afloat amid shrinking overseas demand and waning consumer confidence.

Central bank figures show bill financing, which supplies working capital, accounted for 39 percent of the new loans.

Medium and long-term corporate loans made up 32 percent.

"It (growth) reduces the default risks of domestic firms, which in turn eases worries over bank asset quality at least in the short term," said Sun Mingchun, an economist with Nomura International.

The economists said the dramatic rise in lending could be partly attributed to pent-up demand for loans last year.

The central bank had imposed a curb on lending till November last year to combat inflation and prevent the economy from overheating.

That left "many firms, especially small- and medium-sized ones, facing a severe cash flow problem", Sun said.

Policymakers lifted the curb in November and raised the target for M2 growth to 17 percent for 2009, up from 16 percent that had been in practice since 2006.

The move is expected to ensure there's enough liquidity in the market to spur investment and boost the economy, whose growth dropped to a seven-year low of 6.8 percent in the fourth quarter last year.

"Credit expansion in the first quarter of this year is expected to be very high because banks can maximize investment returns by front-loading new loans," said Jing Ulrich, managing director and chairwoman of China Equities at JP Morgan.

But Ulrich cautioned against a possible rise in credit risk because the increase in liquidity could cause a sharp rise in banks' non-performing loans.

(China Daily February 13, 2009)