The People's Bank of China (PBC) on Sunday gave four reasons why bank loans in the first quarter of this year had grown so rapidly.

At the end of the first quarter, China reported total loans of 20.6 trillion yuan (US$2.575 trillion), up 14.7 percent over the previous year, and representing a rate of increase of 1.7 percentage points over the same period last year.

In the first quarter, domestic banks fulfilled roughly half of their lending targets for the whole year, adding 1.26 trillion yuan (about US$156.25 billion) in loans, up 13.98 percent from a year ago.

"Fast economic and fixed-assets-investment growth brought a strong demand for bank loans," according to a central bank spokesman.

China's economy, fueled by strong investment, soared by a higher-than-expected 10.2 percent in the first quarter despite macro-control measures.

Foreign trade surplus also continued to grow in the first three months and increasing foreign exchange reserves meant that there was more currency for banks to lend, he said. Statistics showed that trade surplus reached US$23.3 billion in Q1.

Another reason for the fast growth of loans was that commercial banks were seeking greater profits through increased lending to businesses.

Commercial banks chose to grant loans earlier in the year than usual in a bid to gain profits earlier, resulting in the rapid fulfillment of lending targets in the first quarter.

The loans growth rate is generally higher in the first half of the year than in the second. This has been the case since 2003.

In order to cool the soaring economy through loan control, the central bank announced on April 28 a rise in 12-month interest rates from 5.58 percent to 5.85 percent.

The PBC would rigidly control bank loans to industries with overheated investments and channel more money instead to support weaker links in the economy, the spokesman added.

(Xinhua News Agency May 15, 2006)