As new loans skyrocketed on the mainland last month, bringing the first-half aggregate to a record high of 7.36 trillion yuan (HK$8.35 trillion), concern that bank credit is inflating asset bubbles is also growing. According to preliminary data released by the People's Bank of China on Wednesday, incremental loans soared 360 per cent from a year earlier to 1.53 trillion yuan last month, while new deposits rose 160 per cent year on year to 2 trillion yuan. The massive deposits underscored the concern that some of the loans - now lying idle in the accounts of companies and individuals - may find their way into the stock and property markets sooner or later. 'Credit growth in China may have become faster than desired. Excess liquidity is the new concern now,' said Sherman Chan, an economist with Moody's Economy.com. The 'moderately loose monetary policy' introduced late last year to prevent the world's third-largest economy going into a freefall has seen fixed asset investment soar and economic perspectives improve. However, as bank loans have surpassed the original full-year target of 5 trillion yuan, some economists feel it has become 'an extremely loose monetary policy' and are calling for adjustments. Bank lending is believed to be directly related to the surging property and stock markets with the excessive liquidity prompting fears of inflation. Mainland housing sales surged 45.3 per cent year on year in the first five months and in major cities such as Beijing and Shanghai, prices have risen more than 30 per cent this year. At the same time, the Shanghai Composite Index has soared 63 per cent. 'Some borrowers may not have put their loans into productive use and these idle funds may eventually create asset price bubbles,' said Ms Chan. It is not known how much of the borrowing has been channelled into the asset markets, but Wei Jianing, a researcher with the State Council, estimated 20 per cent of the loans has found its way into the stock market. The China Banking Regulatory Commission on Wednesday issued rules banning lenders from investing funds raised through wealth management programmes directly into the stock market. The regulator is becoming increasingly concerned about rampant credit growth 'posing risks' to the financial system. Peng Wensheng, an economist with Barclays Capital, said: 'The further acceleration of monetary expansion can help support the growth recovery, but this raises inflation risks down the road. 'In particular, it could fuel the rally in asset markets further. Sharp swings in asset prices would be a more significant concern for macro-economic stability.' However, policymakers are not expected to tighten money supply by raising interest rates or imposing lending quotas this year while the signs of economic recovery are still nascent. But they were likely to fine-tune monetary policies to ease inflation fears and prevent asset bubbles from growing, economists said. 'The central bank is likely to rely on open market operations to tighten interbank liquidity, possibly including a more structural measure such as a rise in the reserve requirement ratio, but the timing will depend on the imminent June economic data,' said Mr Peng. The mainland is scheduled to release first-half gross domestic product and consumer price index data next Friday. GDP growth for the second quarter is tipped to be 7.5 per cent year on year while consumer prices are widely expected to remain in the negative zone until the end of this year.