SHANGHAI - CHINA is showing signs of asset price bubbles as a surge in new lending pushes up prices in the stock and real estate markets, the official Shanghai Securities News quoted a government think tank official as saying.

Mr Wei Jianing, a senior researcher at the State Council Development & Research Centre, was quoted as saying that nearly half of China's newly created liquidity has been circulating in the financial system instead of flowing into the real economy to support growth, thus pushing up asset prices.

'There have already appeared some new early indications of asset price bubbles in China', Mr Wei was quoted as telling a conference.

The newspaper also quoted Mr Cheng Siwei, an influential former Chinese lawmaker, as saying that about 2.4 trillion yuan (S$501 billion) of new lending in the first quarter of this year was used for investment purposes, including stock and property investment.

Total new lending in the first quarter was 4.58 trillion yuan.

He said it was impossible to judge at the present time, however, whether a bubble had already developed in the stock and property markets.

Mr Cheng predicted that China's economic growth could meet the government's target of 8 per cent this year and would reach 9 per cent in 2011, a sustainable rate of growth, the newspaper said.

In order to boost domestic consumption, China should increase workers' wages, improve individuals' returns on asset investment, strengthen social safety networks and increase consumer lending, the article quoted Mr Cheng as saying. -- REUTERS