China's central bank is trying to take the punch bowl away from banks, but it sure has its work cut out judging by the latest surge in bank lending.
Official data released over the weekend showed banks in China lent 1.32 trillion yuan ($217.6 billion) worth of new loans in January, a four-year high and nearly three times the level seen in December.
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Total social financing, a broad measure of liquidity and credit in the economy, was 2.58 trillion yuan last month – double December's level on the surge in bank loans.
Rampant credit growth in China is seen as one of the main risks facing the world's second biggest economy and one the country's central bank has been trying to contain by keeping short-term interest rates high to discourage lending to speculators or borrowers that are high risk.
"The PBOC [People's Bank of China] is trying to take the punch bowl away but the banks are continuing to lend and keep the party going," said Guy Stear, head of research for Asia at Société Générale.
"If we're talking about an economy where the PBOC is trying to discourage capital expenditure to slow down the pace of lending to reduce consumer saving and increase consumption, we would expect to see bank lending decelerate a little bit faster than we have been," he added.
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Economists took note of the fact that the lending numbers may reflect increased liquidity ahead of the Chinese New Year holiday.
They also pointed to the fact that the rise in M2, a broad measure of money supply in the economy, was broadly stable. M2 was up 13.2 percent in January from a year earlier, in line with analyst expectations and compared with a rise of 13.6 percent in December.
The general take away from the data is that despite signs of slowing momentum in China's economy, investment and lending continue to support growth.
"The model we're seeing in China is similar to other emerging markets when they were coming to end of a period of high growth – they resort to an investment not consumption led economy and one that is debt fuelled, and that's certainly the pattern from the January numbers," said Adrian Mowat, chief Asian and emerging markets equity strategist at JPMorgan.
Patrick Chovenac, managing director at Silvercrest Asset Management in New York, wrote: "Looking purely at the decline in the year-on-year rate of credit expansion is kind of like arguing that if I chase my shot of vodka with a pint of beer, I'm actually exercising moderation because the alcohol proof level of my drinks is falling."
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The key now, said economists, was to see how the PBOC reacts to the latest lending data. They added that while the central bank was unlikely to react just yet with a broader increase in interest rates, short-term money market rates were likely to remain high.
"There is an element of seasonality with more lending at the start of the year, so I think the PBOC will keep rates high," said Binay Chandgothia, a portfolio manager at Principal Global Investors.
Société Générale's Stear added: "There is still a lot at risk in terms of policy. How does the PBOC deal with the fact that bank lending is higher than it wants?"
"What people should be concerned about is the policy response rather than the cyclical outlook near term," he said.
— Writing by CNBC's Dhara Ranasinghe. Follow her on Twitter at @DharaCNBC