China's booming wealth management sector has in the last year grown into a way for banks to beat Beijing's lending restrictions, a focal point of China's monetary policy. There has also been a rapid growth in the offshore renminbi currency market via hubs such as Hong Kong, which has attracted heavy deposits.

The news agency said that in an "urgent meeting" that the China Banking Regulatory Commission called with commercial bankers, the regulator warned banks against trying to skirt lending curbs by expanding their deposit bases. The authorities are trying to curb lending in a bid to curb inflationary pressures in what is now the world’s second-largest economy.

"Banks were asked to reorder their wealth management businesses, with the thrust of change aimed at accounting for sales of wealth management products on their balance sheets," the agency reported a person as saying.

By selling wealth management products that offer investors annual returns of up to 7.5-8 per cent - more than double the one-year deposit rate of 3.25 per cent - banks want to attract more deposits to support loan growth.

Given proceeds from sales of wealth management products have also funded new loans in the past, but were not reflected on banks' balance sheets, banks have managed to hide some of their lending activities.

The bank regulator was not immediately available for comment.

Chinese banks are barred from lending more than 75 per cent of the amount they hold in deposits, so to lend more they need to increase their deposits.