China's new yuan loans down in February

China's new yuan-denominated lending stood at 644.5 billion yuan (105 billion U.S. dollars) in February, down from a four-year high in January, the central bank said Monday.

The figure was less than half of January's 1.32 trillion yuan in new loans, but was 24.5 billion yuan higher than February 2013, according to a statement from the People's Bank of China (PBOC).

Social financing, a measure of funds raised by entities through bank credit and other means, amounted to 938.7 billion yuan, down 131.8 billion yuan, or 12.3 percent, from a year earlier, the statement showed.

M2, a broad measure of money supply that covers cash in circulation and all deposits, increased 13.3 percent year on year to 113.2 trillion yuan at the end of February.

The growth rate slowed by 1.9 percentage points from a year earlier, but was slightly up by 0.1 percentage point from a month ago, the PBOC said.

The narrow measure of money supply (M1), which covers cash in circulation plus demand deposits, expanded 6.9 percent year on year to 31.66 trillion yuan at the end of last month.

However, experts argue that the fluctuations of credit figures are mainly caused by seasonal and holiday factors and no loosening of the monetary policy is in need in the short term.

"The beginning of the year usually sees strong credit supply and demand, leading to a monetary surge in January and slump in February. The February data is just normal, taking the holiday factor in account," said Cai Hongbo of Beijing Normal University.

In 2013, social financing fell from 2.54 trillion yuan in January to 1.07 trillion yuan while new yuan loans dropped from 1.07 trillion yuan to 620 billion yuan.

The expansion of M1 is mainly led by capital flowing back to the banks, while the surge of M2 comes from the sufficient funds released after the new year holiday, said Xie Yaxuan, a senior researcher with China Merchants Securities Co., Ltd.

The M2 is expected to grow about 13 percent in 2014, according to the government work report delivered by Chinese Premier Li Keqiang last week.

"The February M2 growth outpaces the target, signaling limited space for loosening monetary policy despite possile short-term liquidity tightening due to falling foreign capital inflows," Xie added.

Cai echoed his thought there is no need to loosen monetary policy, as the demand and supply of monetary credit as well as the economic foundamentals are generally normal.

A short-term stimulus is unlikely, as China always takes a prudent monetary policy, Cai added.