BEIJING, Jan. 11 (Xinhua) -- New yuan-denominated lending in China reached 7.95 trillion yuan (1.2 trillion U.S. dollars) last year, the People's Bank of China (PBOC), the central bank, said Tuesday.

The figure was 1.65 trillion yuan less than the 2009 level of 9.6 trillion yuan, said the bank in a statement on its website. But it overshot the government's full-year ceiling of 7.5 trillion yuan.

New yuan-denominated loans in December last year stood at 480.7 billion yuan, the lowest monthly figure for the whole year.

The country's foreign exchange reserves reached 2.85 trillion U.S.dollars at the end of last year, up 18.7 percent from a year earlier, according to the PBOC.

China saw its foreign exchange reserves expand by 199 billion U.S.dollars in the fourth quarter, the highest quarterly figure last year, it said.

"China's stable economic condition, speculation of a rising yuan, and a widening interest margin between China and other countries, have attracted more foreign capital since the third quarter last year," said Cao Honghui, a research fellow of the Chinese Academy of Social Sciences.

China's broad money supply (M2), which covers cash in circulation and all deposits, increased 19.7 percent year on year to 72.58 trillion yuan at the end of last year.

The growth rate was 8 percentage points lower than a year earlier, but still exceeded the government target of 17 percent.

Though topping the full-year target, the annual loan figure was still within expectations, said Zhu Baoliang, a researcher with the State Information Center.

The rapid growth in loans reflected robust market demand, which was a result of the country's strong economic growth, said Professor Ding Zhijie, of the Beijing-based University of International Business and Economics.

"But it also indicates growing liquidity pressure," he said, noting that liquidity control would be a major task for the government this year.

The government announced late last year a shift in monetary policy from "moderately loose" to "prudent" and repeatedly stated it would give higher priority to stabilizing prices this year.

The government has faced mounting inflation pressure since the second half of last year, with the November consumer price index (CPI) at a 28-month high of 5.1 percent.

Surging consumer prices are largely believed to be a result of excess liquidity, which has escalated since 2009, when the Chinese banks extended about 9.6 trillion yuan in new loans to back economic growth.

PBOC vice governor Hu Xiaolian said at a meeting with bankers at the end of last year that China would bring its overall money supply to a normal level using various policy tools in 2011.

The central bank raised the one-year lending and deposit interest rate twice and bank reserve requirement ratio six times last year.

The government has not yet declared a loan target for this year, and market speculation is there might not be an exact figure.

Qiu Gaoqin, a senior financial analyst with the Shanghai-based Bank of Communications, forecast that strict credit controls would limit this year's new loans to less than 7.5 trillion yuan.

"There is an accumulative effect of last year's numerous increases in reserve requirements," he said.

Slower growth in real estate loans and individual mortgage loans, triggered by continued government curbs on the property market, would contribute to a decline in lending, he said.

However, Qiu said, an expansion in the construction of affordable homes also required bank lending, which was a factor affecting this year's credit control.

He warned of other difficulties that the government could face, including strong demand from a possible investment spree this year, the first year of China's 12th five-year plan, and follow-up demand from projects undertaken with China's 4-trillion-yuan stimulus package.

Zhu Baoliang said the government might look to market tools, instead of setting an exact target from the administrative level to rein in liquidity, including more interest rate hikes and increases in reserve requirements.

PBOC vice governor Hu had previously highlighted the use of the differential reserve requirement ratio to supplement regular policy tools, which could guide banks to lend "reasonably, moderately and steadily" and boost risk controls in the financial system.

The National Bureau of Statistics is due to release other key economic data, including the annual GDP growth, for last year on Jan. 20.