And Chinese banks' NPLs have been been declining, they noted. The ratio fell to 2.45 percent at the end of December, down 3.71 percentage points from the end of 2007.

Positive changes in the sector were reflected in the banks' return on capital, which rose 0.4 percentage point in 2008 to 17.1 percent, Liu said.

Much of the recent surge in lending has represented financing for long-term infrastructure programs supported by the government, part of the stimulus package, as well as large and medium-sized state-owned companies, said Tang Jianwei, a senior analyst with Bank of Communications.

Tang noted that the 4 trillion yuan included 1.18 trillion yuan from the central government, with the rest coming from local governments and private investment, part of which would be channeled through the banking system and accounted for the lending increase.

"The new loans in January were mainly targeted at infrastructure and other projects to improve living standards. It will take time for us to see the benefits, but they will surely do a great deal of good for the Chinese in the long run," Cao said.

Weighing loan quality

When assessing the quality of the loans, a major factor was how much social benefit the projects being funded could create, Wu said.

"Loans for those projects and carefully chosen borrowers would not involve big risks. The 4 trillion yuan stimulus package would provide domestic banks with better earnings prospects this year," Tang added.

Tang forecast that the banking sector's net profits might grow more than 5 percent this year because of booming loan business.

Xiao Gang, BOC chairman, said over the weekend that banks had become stricter about lending than years ago, and the recent loan expansion was not a result of loose standards.

NPL management would also be subject to many types of supervision, from independent directors of the bank and independent accounting firms to government departments such as the CBRC and People's Bank of China (PBOC), the central bank, Xiao added.