Annual growth in China's broad M2 measure of money supply eased a touch in April to 17.1 percent, but analysts said strong lending activity and a drop in household deposits could herald further interest rate rises.
The growth in M2 compared with 17.3 percent in March and economists' expectations of a 17.0 percent rise.
The central bank has slowed M2 growth from a peak of 19.2 percent in January 2006 by raising banks' required reserves seven times and interest rates three times in just over a year.
"Although there were no big pickups in the money supply and loan growth, they are still at very high levels, leaving the central bank with little room for comfort," said Zhu Jianfang, chief economist at China Securities in Beijing.
Zhu noted that M2 growth remained well above the People's Bank of China's full-year target of 16 percent.
Further, banks extended 422.0 billion yuan ($55 billion) in new loans in April, the central bank said on its Web site (www.pbc.gov.cn), bringing new yuan loans for the first four months to about 1.85 trillion yuan - more than half the total for all of last year.
Zhu said another interest rate rise was possible by the end of the month if April consumer inflation figures, due to be released on Monday at 0200 GMT, come in higher than 3 percent and if fixed-asset investment continued to grow at a rapid clip.
FLOCKING TO STOCKS:
Cheng Manjiang, economist with Bank of China International in Beijing, concurred, saying she also saw it as likely that the central bank would raise rates in May. Cheng said the annual growth in outstanding yuan loans, 16.5 percent, was "quite reasonable", but that the newly added loans were still considerably high.
That, coupled with an outright drop in yuan deposits held by households of 167.4 billion yuan in April, put pressure on the central bank to raise rates, she said.
"The reason for the drop in household deposits is quite clear - people are putting more money into the stock market," Cheng said. "If deposits keep flowing out of the banks, the risks to the banking system will increase dramatically."
Many economists have cited negative real interest rates for deposits as one reason why the central bank would probably need to raise rates.
Faced with negative real returns on their savings, depositors have rushed to get in on a stock market boom that has seen the country's main index surge by more than 50 percent so far this year.
Cheng said that situation would probably prompt the central bank to increase deposit rates more than lending rates sometime in the future, if not in the next rate rise.
Zhu, with China Securities, cautioned that the central bank would have to tread carefully, so as not to pull on the reins too sharply.
"It seems that the government is in an awkward position. On the one hand, it fears that the market will race ahead too crazily; on the other, it also does not want an undesirable setback," he said.
"A lot of individual investors who joined the market for the first time seriously lack expertise and are financially very vulnerable."