Money growth cools in February...: Broad money M2 growth eased by 1.5 percentage points to 17.5% YoY in February, down from the 8-month high of 18.9% in January. Narrower definitions M1 and M0 also saw smaller gains post-Lunar New Year, at 19.2% and 6% YoY respectively, down from 20.7% and 31.2% in January. Renminbi loan creation dwindled to Rmb243 bn in the month, contracting 41% YoY, trimming YoY outstanding loan growth to 15.7% (+16.7% in Jan) to total Rmb27.2 trn.

... easing anxiety from January's sharp surge: The latest data is a welcome development, easing the anxiety heightened by January data, when money growth demonstrated significant reacceleration. This supports our earlier interpretation that the fast growth in January was primarily due to frontloaded lending ahead of enforcement of credit quotas, and for emergency needs amidst the severe snowstorms.

PBoC to keep up liquidity management...: We believe that the PBoC will continue to be conscientious in managing liquidity conditions in the banking system, through open market operations and adjustments in the reserve requirement ratio, which have become the main instruments to mop up liquidity stemming from China's balance of payments surplus. We caution against interpreting regular liquidity withdrawals as re-intensification of monetary tightening.

... but not necessarily tightening: February data released so far paint a mixed picture. While monetary tightening such as a rate hike seems the natural response to the sharp surge in consumer inflation (Feb CPI +8.7% YoY), export growth (+6.5%) as well as money and loan growth slowed, and producer inflation was more benign than expected (+6.6%). We reiterate our call for no monetary tightening in the form of interest rate hikes this year.