China shares fall on economic jitters

Chinese shares fell Thursday, snapping a three-day rally that had been spurred by reports suggesting a nascent economic recovery, with banks and textiles dropping while steel stocks rose on lower ore prices.

The benchmark Shanghai Composite Index declined by 0.5 percent, or 9.73 points, to close at 2098.02. The Shenzhen Composite Index for China's second exchange shed 1.3 percent to 644.66.

Shares rose earlier on news that bank lending surged in January as the government rolled out a stimlus plan and a key manufacturing indicator improved, suggesting an economic slump might be nearing its bottom.

"The rally was mainly driven by the financials on new loans shooting up in December and January, but investors doubted whether banks could keep up this level of lending," said Zhang Xiang, an analyst for Guodu Securities in Beijing.

Industrial & Commercial Bank of China Ltd., China's biggest commercial lender, dropped 1 percent to 3.8 yuan, and China Construction Bank, Ltd. slipped 1.4 percent to 4.13 yuan. Midsize lender Pudong Development Bank Ltd. lost 2.4 percent to 17.11 yuan.

The government said late Wednesday it would help struggling textile exporters by increasing tax rebates for exports but investors shrugged off the measure. Analysts said the increase by one percentage point to 15 percent was smaller than expected.

Inner Mongolia Eerduosi Cashmere Product Ltd. gave up 3 percent to 9.84 yuan, while Huafang Textile Co. sank 4.9 percent to 3.32 yuan.

Nonferrous metals producers fell after rising earlier in the week.

Jiangxi Copper Ltd., China's second largest metal producer, was off 2 percent to 13.84 yuan. Yunnan Tin Ltd. slumped 4.1 percent to 13.33 yuan.

Steel makers bucked the downward trend on news that ore prices fell, which would boost their profits.

Baoshan Iron & Steel Ltd., China's biggest steel maker, added 1.1 percent to 5.66 yuan, while Liuzhou Iron & Steel Co. gained 3.6 percent to 4.01 yuan.

In currency markets, China's yuan weakened to 6.8340 to the U.S. dollar, down from Wednesday's close of 6.83343.