China's bank lending is expected to reach three trillion yuan (383.6 billion U.S. dollars) in 2006, the highest in the past four years, said a central bank official. "The total lending amount is 0.5 trillion yuan (63.9 billion U.S. dollars) more that the central bank's target, which was set earlier this year," said Wu Xiaoling, vice-governor of the People's Bank of China at an investment forum.

China's bank lending has exceeded two trillion yuan (255.8 billion U.S. dollars) since 2003. "China's foreign exchange reserves will also exceed one trillion U.S. dollars in 2006," Wu said. "These huge reserves show that China is not lacking capital at present but has excess liquidity in its banking system," she said.

"The central bank must maintain an adequate money supply by resorting to multiple monetary policies to soak up excess liquidity and reduce the risk of inflation," she said. "A flexible exchange rate plays a role in curbing the capital flow and exports, but the key to restraining the increase of the foreign exchange reserve is by accelerating economic structural reform," she added.