SHANGHAI - CHINA'S banking regulator has urged lenders to ensure new loans are helping the economy after concerns that stimulus cash is being used to speculate on stocks and property, state media said on Wednesday.

The China Banking Regulatory Commission reiterated that loans must serve the needs of the real economy, the official Shanghai Securities News reported, citing a recent internal directive issued to commercial banks.

In the directive marked 'urgent", the regulator also ordered banks to avoid a lending surge at the end of each month and quarter, the report said.

Chinese banks, keen to heed Beijing's calls to support economic growth and fund government-backed projects, tend to expedite lending in the last days of each month and quarter to meet internal targets, it said.

The lenders should revise their staff performance criteria to focus more on quality of loans instead of amounts lent by month-end, the regulator said.

'High credit growth has put substantial pressure on the quality of banking assets. There have been cases of fraudulent lending,' the newspaper quoted an unnamed bank official as saying.

Beijing has scrapped lending quotas and adopted a loose monetary policy to help fund a four-trillion-yuan (S$851 billion) stimulus package to prop up growth in the world's third-biggest economy.

In May, new yuan-denominated loans reached 664.5 billion yuan, the central bank said earlier this month, bringing the total in the first five months to 5.84 trillion yuan.

State media reported that China's new lending in the first half of this year may reach 6.5 trillion yuan. -- AFP