UPDATE 1-China bank lending halves in February after January spike

Mon Mar 10, 2014 5:56am EDT

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BEIJING, March 10 (Reuters) - The number of new yuan loans made by Chinese banks halved in February and liquidity in the economy tightened, official data showed on Monday, which analysts said indicated the previous month's surge was not a sign of a policy shift.

New bank loans totalled 644.5 billion yuan ($105 billion) in February, the People's Bank of China said, down from 1.3 trillion yuan in January and below market forecasts of 716 billion yuan.

Total social financing, a broad measure of liquidity and credit, fell sharply to 938.7 billion yuan from January's 2.58 trillion yuan.

"They stabilised monetary policy and this is having an effect on demand for loans," said Tim Condon, head of Asia research for ING Financial Markets in Singapore.

"The whole thing is hanging together."

M2 money supply grew 13.3 percent in February from a year earlier, in line with forecasts. Outstanding yuan loans were 14.2 percent higher than a year earlier, also in line with forecasts.

Chinese data in January and February can be distorted by the timing of the Lunar New Year holidays, which fell mainly in February this year, and as banks try to grab market share.

Still, January's bank lending spike to 1.3 trillion yuan -- more than double the December level and the largest in four years -- was seemingly at odds with signs of tapering growth momentum and efforts by authorities to contain credit in money markets.

Chester Liaw, an economist at Forecast Pte in Singapore, said the decline in bank loans was a sign that policymakers were still trying to rein in unregulated lending.

"The drop suggests that the authorities fight against shadow banking is quickly gaining steam," he said. ($1 = 6.1260 Chinese yuan) (Reporting by Adam Rose and Jonathan Standing; Editing by John Mair)

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