In February, yuan lending growth slowed - but foreign-currency loans jumped rapidly, statistics show.

Outstanding value of foreign-currency lending rose 53.31 percent to US$258.4 billion in February after a 32-percent growth in January.

Banks extended new forex loans worth US$21.4 billion in February, or 62.4 percent of the yuan loans issued last month.

Forex lending started to rise since the second quarter of 2007 and picked up the pace this year - the 2008 monthly growth is similar to the quarterly gains of 2007.

Jiang Chao, a Guotai Jun'an Securities Co analyst, said there are two reasons for the rise in forex loans.

One is the cheaper cost, as interest-rate cuts trade against the greenback's decline. The other is that forex liquidity remains moderate when compared with tight controls on the yuan since October last year.

"The rising forex lending indicates that the lending demand is still huge, and a tight monetary policy will continue," said TX Investment Consulting Co.

Jiang said it is likely that the central bank will take market or administrative measures such as increasing foreign currency reserve requirement ratios or imposing credit control quotas to cool the rise in forex lending.

Standard Chartered Bank's Green also expects quotas on forex loans as well as yuan loans.

(Shanghai Daily March 17, 2008)