Beijing has found a new culprit to blame for China's asset bubbles -- foreign hot money. China's official reserves are rising again, breaking the $2 trillion mark in April, and unexplained inflows are once again coming under the critical microscope.

So far the main driver for the spectacular run in China stocks and properties is unquestionably the loose lending policy at home -- bank loans for the first half of this year tripled the level seen last year to 7.4 trillion yuan ($1.1 trillion).

But by pointing a finger at foreign capital inflows, Beijing is hinting that there are other factors at play.

Guessing how much hot money flows into China has become the favorite pastime of China watchers. Because of the lack of transparency on the capital account, those guesses vary widely from $30 billion to $144 billion for the second quarter.

Why money is flowing into China at this point is a bit unclear, because unlike in 2007 when foreign capital flocked in, currently there seems little chance that the yuan will appreciate. The market consensus is the yuan will move in lockstep with the dollar. A rising yuan will after all hurt struggling exports further while a falling yuan might lead to capital outflows.

The prevailing view among the Chinese is foreign capital is chasing rising asset prices in China. The country's benchmark stock index is already up 70 percent this year, hitting a two-year high on 15 July.

There is also speculation about money flowing into properties, but while prices have also risen significantly of late, real estate is a somewhat unlikely destination for hot money as it comes with heavy tax penalties if the holding period is shorter than ten years.

Moreover, there is evidence that not all foreigners are that bullish. Foreign direct investment has fallen now for nine straight months. China drew in $43 billion in FDI in the first half of this year, down 18 percent from the same period last year, although that is probably down to recession-hit Western firms cutting back on their investment spending globally.

Foreign capital feels like a rather easy target for Beijing policymakers. Rather than blaming such flows, over which the government does not have absolute control, it would be better off examining some of the levers it can pull.

Despite the background noise, China does seem to be taking some steps to drain the extraordinary amount of liquidity it has of late injected into the economy. The central bank said on Wednesday that it will issue 100 billion yuan ($15 billion) to banks. The one-year bonds would bear a punitive yield of merely 1.5 percent.

But this is still just tinkering at the edges. What Beijing needs to do is to tell banks they should stop flooding the market with money before it gets too late.

-- At the time of publication Wei Gu did not own any direct investments in securities mentioned in this article. She may be an owner indirectly as an investor in a fund. For previous columns, Reuters customers can click on --

(Editing by Martin Langfield)

Wei Gu is a Reuters columnist. The opinions expressed are her own.