China said Friday the nation\'s lenders issued a lower-than-expected 492.6 billion yuan ($77 billion) in new loans in July, indicating Beijing\'s efforts to rein in liquidity are taking effect.But the People\'s Bank of China, the central bank, still sounded the alarm on the politically-sensitive inflation figure, which hit a more than three-year high of 6.5 percent in July. July loans were lower than the 633.9 billion extended in June and 25.2 billion yuan less than the same month last year, the bank said in a statement.It was also below forecasts of 555 billion yuan by 11 economists surveyed by Dow Jones Newswires.The broadest measure of money supply, M2, was up 14.7 percent year-on-year at the end of July compared with a 15.9 percent rise at the end of June, the central bank said, in another sign of slowing credit.\"Today\'s data should reassure Beijing that rate hikes and other measures are having the intended effect of tightening credit conditions and reducing upward pressure on inflation,\" said Royal Bank of Canada economist Brian Jackson. Policymakers have been pulling on a variety of levers to rein in bank lending over fears of soaring property prices and inflation, which Beijing worries could trigger social unrest. In its quarterly monetary policy report, also released on Friday, the central bank said it was \"not optimistic\" about the prospect of inflation and stressed stabilising prices remained a top priority. \"The foundation of stabilising prices is not sound and the situation is not optimistic,\" it said. The bank also warned emerging economies like China may face significant captial inflows due to lack of growth momentum in other major global economies. The central bank has hiked interest rates five times since October and increased the amount of money banks must keep in reserve numerous times in the past year as part of its monetary tightening.