There are signs to indicate that more money has flown into investment rather than consumption, a scenario that can create problems for the national economy, Li said.

The PBOC said yuan-denominated lending rose 15.1 percent over the previous year, up by 2.1 percentage points compared with the figure at the end of 2005.

Banks extended 3.18 trillion yuan ($407.7 billion) in new loans in 2006, when the PBOC's original target was 2.5 trillion yuan ($320.51 billion).

Analysts said the lending growth momentum showed there was still a possibility for investment to rebound this year and create new challenges for macroeconomic regulators.

Li, however, said he didn't see the need to raise interest rate anytime soon. His view was shared by other economists, though they said the policy makers could raise the rate by a small margin this year.

(China Daily 01/16/2007 page3)

1

2

(For more biz stories, please visit Industry Updates)