China's new yuan loans in March hit a fresh record high in the first quarter as money supply expansion surges. Analysts say it signals the government's efforts to unleash credit to stimulate the domestic economy is working.

Figures out Saturday show new yuan loans in the first quarter hit nearly 5 trillion yuan, which already stood at 92 percent of the official minimum target for this year. In March alone, new yuan loans increased 1.89 trillion yuan, a new fresh high. Experts say the increase was boosted by the 4-trillion-yuan stimulus plan and showed the possibility of a faster economic recovery. But they say such high bank credit won't continue for the rest of the year.

Wang Songqi, Deputy Director of Inst. of Finance and Banking, CASS, said, "The trend won't continue. Historical data show commercial banks are all inclined to extend most of the credit in the first quarter. And, as a result, they will generate more interest for the year."

Experts believe abundant extending credit signals China's efforts to boost the domestic economy is working. But they are still concerned about the quality and structure of credit. Figures show commercial banks are extending more credit to State-owned large enterprises which have abundant capital, but it's still hard for small and medium sized enterprises to get finance. Industry insiders say the situation should be changed.

Peng Yanping, Director of China Securities Research, said, "We believe bank credit to small and medium sized enterprises will increase gradually in the future. This is also one of the government's policy directions."

China's money supply is also picking up... Annual growth in China's M2, a broad measure of money supply, jumped more than 25 percent in March. That's up from the 20 percent growth it saw in February. Analysts say the fast rebound of M2 indicates China's liquidity is abundant, which is very important for economic recovery.

(CCTV April 13, 2009)