China's economy is facing heightened overheating signs, as outstanding bank loans surged 15.97 percent year on year by the end of May amid a seemingly unabated investment binge, a news report said Friday.

Chinese banks extended 209.4 billion yuan (26.1 billion U.S. dollars) worth of local currency loans in May alone, nearly double that of the same month last year, the Xinhua-run Shanghai Securities News reported. The "big four" state banks accounted for half of the new loans.

The villa area at the foot of Fragrance Hill in northwestern Beijing. [newsphoto file]

In the first five months alone, newly-added loans reached 2.12 trillion yuan, already nudging the annual target of 2.5 trillion yuan set by the central bank.

Broad money supply jumped 19.5 percent in May.

The Securities News paper said it obtained the figures from insiders. The government's announcement is set to come out later this month.

The government has accelerated efforts to rein in excessive spending in real estate, roads, factory equipment and other fixed assets this year to cool the economy, which, largely driven by investment, has been growing at roughly 10 percent in each of the past three years.

On April 28, the People's Bank of China raised the minimum rate commercial banks charge on one-year loans in local currency, the yuan, 27 basis points, to 5.85 percent in an aggressive move to discourage lending. It was the first increase since October 2004.

The central bank, however, left interest rates on deposits unchanged as, theoretically, increased interest paid on deposits could encourage savings and dampen spending enthusiasm at a time when China is hoping its consumers will contribute more to economic expansion.

In the meantime, the central bank required domestic commercial banks buy multi-billion-yuan bills it issued in most weeks in a bid to further restrain their lending capacities.

However the new figures show China's latest round of the macro-control -- which also include a recent campaign by nine ministries under the State Council, or the Cabinet, to cool down the heated real estate market, by lifting the down payment requirement for house purchases -- had very limited effects, economists and government officials acknowledge.

Chinese banks may issue as much as 3 trillion yuan worth of loans in 2006, they agree.

As big Chinese banks are rushing to go public and improve business prior to fully opening the country's financial market to foreign rivals by the end of this year under a WTO commitment, they increasingly focus on loan profits.

China Construction Bank, which took the lead among the "big four" state banks to list its shares last October, has seen a much bigger lending size than the three others so far this year.

China targets an 8 percent growth rate for the full year, but the world's fastest-growing major economy expanded a revised 10.3 percent in the first quarter.

Zhou Xiaochuan, China's central bank chief, told a recent seminar in Beijing that another rise of interest rates is not on the agenda. He said as financial data for May are not yet available, it's not known whether the April loan rate hike has had its desired effect.

A rate hike cannot have immediate effects as China's immature market lags behind in response, said Zhao Xijun, an economic professor with the Beijing-based Renmin University of China.

Instead, many economists say the government might use mixed tools, including administrative and exchange rate measures, to cool down the roaring economy. Commercial banks are also urged to raise their required reserves at the central bank as a way of reducing the money that otherwise can be lent.

But Zhao said he believes a stepped-up economic expansion is actually in need of greater financial support.

"We cannot limit (loan growth) in accordance with the data seen in previous years," he told Xinhua.