Amid a wave of spending by Chinese on housing, cars and business investments, the country's banks have doubled the amount of loans issued over the past eight months compared to the same period last year, the central bank said.

The People's Bank of China, the country's central bank, said on Wednesday it will keep interest rates on deposits and loans basically stable. [newsphoto.com.cn]

The People's Bank of China said it was keeping an eye on that growth, but announced no immediate plans to raise interest rates. Rates on deposits and loans will remain ``basically stable,'' the bank said in a notice posted on its Web site following its third quarter meeting Wednesday.

Total lending by Chinese financial institutions hit 2.1 trillion yuan (US$256 billion) by the end of August, up 1.1 trillion yuan (US$134 billion) from the same period last year, the bank said.

Money supply has grown by 21 percent over the first eight months of the year, the bank said - considerably faster than the target of 18 percent for the year.

``Although the new phenomena appearing in the economy need to be observed further, credit growth is obviously on the fast side,'' the statement said. Excessive growth in money supply could ``intensify structural problems and affect the continued healthy development of the economy,'' it said.

The central bank didn't indicate that any drastic liquidity tightening measures would be implemented. But it said it was raising by 1 percentage point the percentage of total deposits that banks are required to maintain on reserve.

China's economy grew by 8.2 percent in the first half of this year, despite the effects of the SARS outbreak on airlines and other service businesses. Strong foreign investment and the stellar performance of the manufacturing sector were the main engines of growth.

Increasingly affluent urban Chinese have increasingly turned to easily available bank loans to finance housing, education, foreign travel and consumer items.

Private car ownership passed 10 million earlier this year, much of it fed by loans.

Lenders need to guard against risks related to new loans, increase internal controls and promote reform, the central bank said.

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