CHINA'S economic growth surged to 10.7 per cent in the last quarter of last year and 8.7 per cent for the year, justifying government efforts to rein in bank lending to prevent asset bubbles.

Confirmation of China's powerful growth came as the World Bank warned the situation remained fragile although the global economy was recovering. Global markets fell sharply ahead of the figures on fears that China's decision to limit bank lending could endanger the global economic recovery.

The unprecedented flood of money into China's economy has lifted property and stock markets to record heights and Chinese regulators this week asked some banks to limit lending.

For the past few months, Beijing has consistently said it would continue its looser monetary policy and stimulus measures, but in recent weeks it has changed its tone as concerns over asset prices heightened, resulting in new lending restrictions.

"We have a number of regulatory requirements to ensure prudent supervision," China Banking Regulatory Commission chairman Liu Mingkang said. "For those that failed to meet these standards, we told them to limit lending."

The China Securities Journal cites sources in Beijing and Shanghai saying loans of more than $US146 billion ($160bn) have already been issued this year.

Bank of China, one of China's big-four state-owned banks that control more than 50 per cent of national lending, told all branches this week to stop issuing new yuan loans and curb foreign currency-denominated loans.

Beijing's stance on monetary policy has been hardening as it prepares to gradually wean the country off last year's massive stimulus.

Growth this year is expected in some quarters to reach double digits, with Chinese agencies offering forecasts in recent weeks of 9.5-10 per cent.

"It is likely that economic growth in 2010 will exceed 2009's level. However, the deceleration of investment growth could continue this year, as new public sector investment projects are more strictly controlled," JPMorgan China equities chairman Jing Ulrich said.

"Over the course of the first quarter, the headline GDP and export data should register at strong levels against last year's low base, while inflationary pressure could become more evident after a period of deflation from February to October 2009."

China's consumer prices rose by 1.9 per cent in December, after swinging into inflationary territory a month earlier with a 0.6 per cent year on year increase.

Producer prices are also inflating, rising 1.7 per cent December, from -2.1 per cent in November.

Industrial production growth slowed to 18.5 per cent year-on-year in December from 19.2 per cent a month earlier, with analysts suggesting that may be partly due to severe winter weather and power supply disruptions.

Source: BBCB & The Australian