CHINESE banks are claiming progress in recalling tens of billions of yuan lent illegally and in dampening the speculative frenzy that has fuelled inflation and brought chaos to the financial system. By yesterday, all speculative loans, estimated to total up to 200 billion yuan (about HK$270 billion at the official rate), were to have been recalled by China's state-run banks. Speculative loans - credit extended without official approval - are used for everything from property investment to buying imported cars for company executives. Banking officials said yesterday they could not say what percentage of funds had been reclaimed. But reports in the state-run media suggested some headway had been made. The Beijing branch of the Industrial and Commercial Bank, for example, said that by August 10 it had recalled 4.2 billion yuan of speculative loans, according to the People's Daily. It did not say what percentage of total speculative loans this constituted, but said the bank had made 10 billion yuan of such loans by the end of last year. The funds were recalled after the bank sent more than 60 inspection teams to five provinces to collect the funds. The teams managed to claim back two billion yuan over 20 days. The Industrial and Commercial Bank last week reported that nationally, during the last two months, it had reclaimed 9.8 billion yuan of speculative loans. In Hubei, the provincial branch of the People's Bank of China, the central bank, had seen its deposits increase by 2.54 billion yuan in June and July, of which 1.1 billion yuan came from recalled speculative bonds. Thus, the People's Daily said, the province had enough funds for key construction projects and would not have to issue IOUs to farmers to pay for the summer grain crop. In Shaanxi province, deposits at all banks rose by 1.48 billion yuan in June and July, of which 860 million yuan came from speculative bonds, according to the official newspaper. ''Last year there was a serious outflow of capital from Shaanxi, the collection of social funds went out of control, and bank deposits collapsed since the beginning of this year,'' the newspaper said. In the first quarter of this year, bank deposits in the province fell by 2.1 billion yuan, making funds very tight. Provincial authorities said a number of problems had now been resolved, including the illegal collection of funds, the issuing of speculative bonds, and the use of credit to set up economic entities and to speculate in stocks and property.