China's bank lending trumped forecasts to spike to 1.01 trillion yuan ($160 billion) in March, a sign of fresh traction in Beijing's bid to boost credit creation to support the cooling economy.
The surge in lending was the biggest monthly extension of credit since January 2011, when new loans last topped 1 trillion yuan, holding out hope that China's economy will not only avoid a hard landing but pick up speed again later this year.
Economists said Thursday's data, which also showed stronger-than-expected growth in money supply, reinforced bets that an interest rate cut is unlikely since Beijing can ease monetary policy by just loosening credit controls.
"The new loans number is very strong. It signals that loan demand has rebounded and shows that the economy is turning," said Zhang Zhiwei, an economist at Nomura in Hong Kong.
China is set to release its first-quarter growth report on Friday at 0200 GMT, and analysts expect the slowest economic expansion since the tail-end of the 2008/09 global financial crisis.
Analysts polled by Reuters expected first-quarter growth of 8.3 percent from the same period a year earlier. On a quarterly basis, growth is expected to slow to 1.6 percent from 2.0 percent in the fourth quarter last year.
But things may be looking up judging by Thursday's data.
M2 money supply rose to a three-month high of 13.4 percent in March from a year earlier, ahead of forecasts for 12.9 percent growth and following February's 13 percent expansion.
Economists had expected banks to make 800 billion yuan worth of new loans in March. Outstanding yuan loans at the end of March were 57.25 trillion yuan, an increase of 15.7 percent from a year earlier.
The burst in bank lending in March lifted overall lending in the first quarter to 2.459 trillion yuan, ahead of a quarterly target for 2.4 trillion yuan, and above the 2.2 trillion yuan seen in the same period last year.
China's foreign exchange reserves, the world's largest, rose by around $124 billion in the first quarter to $3.305 trillion at end-March, reversing a rare decline of $20.6 billion in the fourth quarter.
Ting Lu, an economist at Merrill Lynch-Bank of America, said growing reserves indicated capital was returning to China after fleeing in the second-half of 2011 when Europe's raging debt crisis drove nervous investors out of emerging markets.
The World Bank, for instance, cut its forecast for China's 2012 economic growth to 8.2 percent on Thursday, from 8.4 percent.
It said a rebound might not begin before the third quarter of the year as listless foreign demand and a government-induced real estate slowdown restrain a recovery.
Some analysts also wondered about the quality of some of the new loans being written, as Chinese banks have been seen to be increasingly exposed to sour loans and local government debt as the property market and broader economy slows.