Savings increased and more loans were issued in January and February, keeping China's economy in good health, the central bank reported Thursday.

The People's Bank of China said in a monthly report that outstanding loans from all financial institutions stood at 9.44 trillion yuan (US$1.14 trillion) at the end of February, up 12.7 per cent from the same period of last year.

Banks lent 120 billion yuan (US$14.4 billion) in the first two months of the year, 53 billion yuan (US$6.4 billion) more than the same period a year ago. More than 23 billion yuan (US$2.8 billion) of this year's amount was in medium-term and long-term loans, another improvement over 1999.

But residents still held tightly to their cash. China's bank savings had risen nearly 10 per cent to 6.23 trillion yuan (US$750 billion) by the end of February.

Growth in China's money supply, by both the broad measure of M2 and the narrower yardstick M1, slackened in February, however. The central bank attributed this slowdown to a cash circulation interruption: Chinese Lunar New Year.

The "M2," which includes cash in circulation and all bank deposits, rose 12.8 per cent from last year to 12.2 trillion yuan (US$1.47 trillion).

The "M1," which includes cash in circulation and corporate deposits, grew 15.3 per cent since the first two months of 1999. It stands at 4.5 trillion yuan (US$542 billion). But it came in 2.4 percentage points lower than the end-of-1999 supply rate.