Chinese banks nearly doubled their lending in January, raising concerns that loan quality could suffer, but banking and policy experts told Xinhua they believe financial institutions won't return to the days of high non-performing loan (NPL) rates because the industry's risk controls and capital base have improved.

The banks won't experience the same problems plaguing financial sectors in other countries, despite the pressure of the global economic downturn, the experts said. That is because much of the new lending this year will probably result from the central government stimulus plans, which will go into projects such as railroads with solid, long-term earnings prospects.

Fears over loan surge

A report last month by Bank of Communications analysts, "China's Economic and Financial Outlook in 2009," forecast that lending would expand about 16 percent this year, or by 4.8 trillion (about 703 billion US dollars) to 5 trillion yuan.

Similar figures were given last week by Premier Wen Jiabao, who told the annual legislative meeting that China would follow a proactive fiscal policy and moderately easy monetary policy this year. As a result, Wen said, banks were likely to extend 5 trillion yuan in new loans this year.

The China Banking Regulatory Commission (CBRC) said banks extended a monthly record of 1.6 trillion yuan in new loans in January, more than double the figure of 803.6 billion yuan a year earlier.

The CBRC said loans grew by 456.1 billion yuan in November and 771.8 billion in December. The loan surge began not long after China announced a two-year, 4-trillion-yuan stimulus plan. After that plan was announced in November, banks stepped up lending, experts said.

National figures haven't yet been announced for February, but Jiang Jianqing, chairman of Industrial and Commercial Bank of China (ICBC), the country's top lender, told the legislative meeting last week that his bank's new loans in February exceeded 100 billion yuan. He forecast that the bank's loan portfolio would grow 12 percent to 13 percent this year.

The lending wave has aroused concern that higher NPL rates might lie down the road, as the global turmoil increasingly affected China and its banks.

Wu Nianlu, vice president of the China International Finance Society, told Xinhua Monday that although the overall condition of the Chinese banking sector was healthy, "we should also be alert to the banking sector's development and potential risks in the near future.

"If economic growth slows, the risk of new NPLs would rise," he added.