Chinese banks doled out 9.6 trillion yuan in new loans last year, data showed on Friday, far exceeding the government's minimum target of 5 trillion yuan and amounting to nearly 30 percent of 2008 gross domestic product.
Full-year gross domestic product data as well as consumer inflation figures are due on Thursday and will likely underscore how hot China's economy is running, underlining the central bank's decision on Tuesday to lift bank reserve requirements for the first time since June 2008.
"Hikes in bank reserve ratios will continue to be the central bank's main tool this quarter. Inflationary expectations will rise sharply in coming months, putting bond yields under heavy pressure to rise," said Yang Yongguang, senior bond market analyst with Guohai Securities in Shenzhen.
Indeed, government bond yields edged higher, with the one-year yield rising to 1.5691 from 1.5555 on Thursday.
China's stash of foreign currency reserves rose $126.5 billion in the fourth quarter to $2.4 trillion, the central bank said, in line with market expectations.
December's gain of $10.3 billion was the smallest since February, when reserves actually shrank, though economists said valuation effects could have been the cause.
A broad measure of China's money supply slowed to annual growth of 27.7 percent in December compared with 29.7 percent in November, but analysts still expected policymakers to try to curb growth in the stock of money in the first half of 2010.
"Concerns about capital inflows and the health of the export sector will limit the scope for interest rate tightening, but we do expect to see a moderation in full-year bank lending growth in the order of approximately 20-30 percent from 2009 levels, and the use of reserve requirements to manage the volume of money supply," Jing Ulrich, chairman of China equities and commodities in Hong Kong, said in a note.
TEMPERING TRADE OUTLOOK
After robust December trade figures and reports of a surge in new lending in the first week of January fanned fears of overheating in the economy, some officials have been trying to cool expectations.
China's exports will make a slow recovery in 2010, a government spokesman said on Friday.
"Both exports and imports will only stabilise at a relatively low level this year, and I believe the most ideal situation is to reach 2008's level," Yao Jian, a Commerce Ministry spokesman, said after a news briefing.
China's exports surged 17.7 percent in December from a year ago after 13 months of declines, and imports last month jumped 55.9 percent.
Figures next week are expected to show that China's economy picked up steam in the fourth quarter. GDP is expected to have jumped 10.9 percent in the fourth quarter from a year earlier, a pick up of 2 percentage points in annual growth from the third quarter.
Most analysts believe China's tightening moves this week will have little impact on economic growth or corporate earnings, but fears persist that Beijing may be about to launch more aggressive measures that will weigh on the economy.
The Asian Development Bank added its voice to those calling for tighter policy in China.
"No country has responded as effectively and as resolutely to the crisis as China has. With the global economy recovering and with China's growth now surging, there may be a need for change in policy settings," a study commissioned by the ADB said. It was completed before Tuesday's increase in bank reserve requirements.
Shares of mainland Chinese companies traded in Hong Kong were nearly unchanged on the day with investors still cautious after the central bank action this week, but posted the biggest weekly decline since the last week of November 2009.
The outlook has become particularly muddied for Chinese banks and property companies on concerns Beijing will move to cool surging real estate prices to head off inflation and a potentially destabilising asset bubble.
China also saw a 103 percent rise in foreign direct investment in December compared with a year earlier, though full year inflows shrank for the first time since 2005.
December FDI figures often reflect unusually large increases for accounting reasons.
