China's top banking regulator on Thursday urged the country's lenders to prevent the risk of bad loans when increasing credit support for the slowing economy.

Chinese banks must be "on high alert for the accumulation of hidden risks as loans surge" and balance business growth and risk control, said Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), in a CBRC statement issued on Thursday.

The lenders should make sure they have enough capital to cover potential credit losses and that the borrowers have the ability to repay the loans, Liu said.

The Chinese government has adopted a moderately easy monetary policy late last year to encourage more credit as a way to spur economic growth, but this has sparked worries about more bad loans.

In March alone, new loans issued in Chinese currency reached 1.89 trillion yuan (US$276 billion), the third straight month that new loans exceeded 1 trillion yuan and a surge of 1.61 trillion yuan from last March, central bank data show.

"China's macro-control policies have already taken effect in the first quarter, and there are positive changes in some economic indicators," Liu said.

China said on Thursday its first-quarter economic growth was 6.1 percent year on year, the slowest in 10 years. Data showed strong growth in industrial output, fixed-asset investment and retail sales but steady weakening for exports and foreign direct investment.

Liu said Chinese banks maintained solid operation in the first quarter and increased the ability to resist risks.

Lenders in China, including foreign banks, saw their ratio of non-performing loans to total outstanding loans drop 0.38 percentage points from the beginning of 2009 to 2.04 percent at the end of March, CBRC figures show.

Banks should beef up credit support for small-and medium-sized enterprises, rural areas and projects that improve people's welfare and environmental protection, Liu said.

(Xinhua News Agency April 17, 2009)