China sees surge in bank lending amid warnings economy may overheat

SHANGHAI, China (AP) - China's outstanding bank loans rose nearly 16 per cent in May over a year earlier to $26 billion US, state media reported Friday.

The figures show efforts to curb an investment binge may not to be working, said the Shanghai Securities News, a newspaper run by the government's Xinhua News Agency. New loans totaled $264 billion US in just the first five months of the year, closing in on the central bank's annual target of $312 billion US, the paper reported. It said China's four biggest state commercial banks accounted for half of the new loans in May.

The government has sought to discourage what it deems to be excessive investments in real estate and other construction. That aims to temper economic growth, which has hovered near 10 per cent for three years, straining the country's financial system and its energy and transport capacity.

Beijing has ordered local officials to reduce land use sales for such projects, ordered banks to cut back on lending and enacted new regulations meant to discourage property speculation.

Meanwhile, the government reported Friday that the producer price index, a key inflation indicator, rose 2.4 per cent in May from the same month a year earlier. That was up from a 1.9 per cent year-on-year increase in April.

Producer prices rose 2.6 per cent in the January-May period from a year earlier, the National Bureau of Statistics reported.

Purchasing prices for raw materials, fuel and power rose 5.5 per cent over a year earlier in May, down slightly from the 6.1 per cent increase seen in April. Gasoline prices rose nearly 20 per cent, however, while prices paid for kerosene jumped 24 per cent and diesel surged 20 per cent.

At the same time, prices for food and consumer durable goods declined by 0.8 per cent and 2.1 per cent respectively, it said.

China's consumer price index, its main gauge of inflation, has been kept largely under control and is expected to remain at about 2 per cent this year.