Loans to the property sector accounted for nearly 20 per cent of all new lending to companies in the first five months, according to official statistics carried in the Wen Hui Daily newspaper.

At the end of May, outstanding loans to the property sector - including both companies and individuals - stood at 231 billion yuan (HK$217 billion), up 55 per cent year on year. Property loans increased by 34 billion yuan in the first five months of the year.

The top five sectors for lending were the retail industry, with 18.7 per cent, manufacturing, with 15.4 per cent, commercial services, with 11.8 per cent and construction with 7.3 per cent.

Despite heavy lending to the property sector, the bad loan ratio of Shanghai banks edged down 0.85 percentage points to 6.33 per cent at the end of May.

Some analysts say the Shanghai property market is showing signs of a bubble, especially at the top end.

'There is a lot of speculation in the luxury housing market which has led to a bubble,' said an official for property developer the Shanghai Lujiazui Finance and Trade Zone Development Company.

High prices in the inner city have forced many people to move into the suburbs, especially to areas like Pudong and Minhang which are connected to the city centre by the subway line, according to a recent survey by a domestic consultancy.

Last month an investigation into two local developers cast a spotlight on back-room land deals.

In the wake of the scandal, officials vowed to implement an auction system for land sales and review all deals in the last two years.

Analysts said moves to tighten credit were aimed at speculators, not first-time home-buyers.

The central bank has raised mortgage lending rates and tightened requirements for borrowers.