Chinese bank lending surged last month and property prices rose at the fastest rate in nearly two years, underlining the risk of overheating in the economy even though consumer price inflation eased.

New bank loans reached Rmb1,390bn ($203bn, £130bn, €148bn) in January, more than the previous three months combined, after banks rushed to issue credit to clients in the first business days of the year, forcing the banking regulator to halt lending temporarily at some banks two weeks ago.

House prices in 70 cities rose by 9.5 per cent in the year to January, up from 7.8 per cent in December, although there is anecdotal evidence that housing sales dropped last month in some of the larger cities.

The rapid rebound in the economy over the past year has been based on easy credit, much of it channelled into infrastructure and property construction. However, the sharp rise in bank loans has prompted intense discussion within China on the risks of fomenting bubbles.

The new data released yesterday provided a mixed picture, with consumer price inflation actually dropping to 1.5 per cent in January from 1.9 per cent the month before, while factory-gate inflation rose faster than expected to 4.3 per cent from 1.7 per cent.

The dip in headline consumer inflation led some economists to play down the prospects for a swift hike in interest rates. “Lower-than-expected CPI combined with the slowdown in lending since the middle of January will reduce fears of any imminent further monetary tightening,” said Peng Wensheng at Barclays Capital.

However, Liu Ligang, an economist at ANZ, said the underlying trend showed that inflation was accelerating. “Today's inflation data showed that more policy tightening is urgently required in order to contain the rising inflation risk,” he said.

In a report issued yesterday, the Chinese central bank said that policy remained “moderately loose” but hinted at slow tightening when it said monetary conditions would “gradually move toward a normal situation from an anti-crisis situation”.

The figures released yesterday showed a spike in the M1 measure of money supply, which mainly includes cash and short-term bank deposits, and which jumped 39 per cent last month year-on-year, the fastest rate of increase in a decade. The need for cash during the forthcoming Chinese new year holidays could have been one explanation, but some economists see that as a sign of potential future inflation as households gear up to spend more.

New loans in January were a sharp increase from the Rmb379.8bn issued in December but the figure was down from Rmb1,620bn the same month last year, when the government's stimulus plan started to kick in. The M2 measure of money supply eased to 24.1 per cent year-on-year, from 25.3 per cent.

The lending was unusually strong this year, leading the authorities to clamp down on loans after the first fortnight. Although that was widely interpreted by investors as the start of tightening monetary policy, many economists argue that the real intention was to prevent the policy stance from becoming even looser.