Chinese banks extended 620 billion yuan ($99.76 billion)in new loans in February, missing market expectations of 750 billion yuan as the central bank moved to withdraw liquidity to ward off inflationary risks.
Although the new loans in February were down sharply from January's 1.07 trillion yuan, they outstripped December's 454.3 billion yuan and November's 522.9 billion yuan, suggesting monetary conditions are loose.
The People's Bank of China (PBOC) started to mop up short-term cash from the banking system in late January. Media has reported that the central bank has signalled to commercial banks to slow lending.
Bank lending is a focal point for investors trying to assess the bias in China's monetary policy as loans are made at Beijing's behest in the state-directed financial system. A sharp fall in new loans could point to weakness in the economy.
The lending data came a day after the government said inflation rose to a 10-month high in February while factory output and consumer spending were weaker than forecast.
Data from the National Bureau of Statistics showed the consumer price index rose 3.2 percent in February from a year ago, versus expectations of a 3.0 percent rise, while annual industrial production (IP) growth in January and February combined at 9.9 percent was the lowest since October 2012 - the starting point of China's nascent economic recovery.
The PBOC is likely to keep policy settings neutral for most of 2013 to cement the recovery, although the risk may be tilted towards tightening, rather than easing, analysts say.
The government in early March unveiled a package of new measures, including levying a 20 percent tax on capital gains, to calm frothy home prices.
China's M2 measure of money supply grew 15.2 percent in February from a year earlier, in line with market expectations of a 15.1 percent rise and down slightly from the previous month's 15.9 percent rise, central bank data showed.
Outstanding yuan loans in February rose 15 percent from a year earlier, the central bank said in a statement on its website, www.pbc.gov.cn, roughly in line with the 15.3 percent consensus forecast in a benchmark Reuters poll but down slightly from January's 15.4 percent growth.
The central bank said China's total social financing aggregate, a broad measure of liquidity in the economy, stood at 1.07 trillion yuan. ($1 = 6.2147 Chinese yuan)
(Reporting by Sui-Lee Wee and Judy Hua; Editing by Robert Birsel)