(Corrects 2nd paragraph to show Hang Seng Index ended down 0.6 percent, not 1.6 percent)
* China banks drop in HK on fears of lending curbs
* China's main index jumps over five-day moving average
* China Mobile tanks after earnings, bleak outlook
* Four new listings in Shenzhen mark firm debut (Updates to close)
By Parvathy Ullatil & Claire Zhang
HONG KONG, Aug 21 (Reuters) - China shares ended a roller coaster week on a high note, advancing 1.7 percent in rising volume on Friday, led by banks after strong earnings reports, although it posted its third weekly loss in a row.
Hong Kong shares dropped 0.6 percent on Friday as fears resurfaced about a likely clampdown on lending by mainland banks, while shares in China Mobile continued to slide after a disappointing second-quarter performance.
Reports that China's banking regulator may tighten capital rules by excluding subordinated bonds banks sell to other lenders from their capital base, triggered selling in Chinese bank stocks in Hong Kong.
The China Banking Regulatory Commission (CBRC) has issued a document to lenders seeking feedback on the move, banking sources close to the regulator told Reuters early in August.
"This is old news and the market already responded to this once. But investor confidence has been so shaken by the sell-off earlier this week that every time this news surfaces its an excuse to sell," said Steven Leung, sales director with UOB Kay Hian.
CHINA MOBILE AT FOUR-WEEK LOW
The benchmark Hang Seng Index finished 129.84 points lower at 20,199.02, sliding 3.3 percent for the week.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, was down 0.5 percent at 11,464.73 even as the Shanghai Composite Index gained 1.7 percent.
China Mobile, the world's largest mobile carrier, fell 3.4 percent to end at a four-week closing low on Friday after the company posted its slowest interim profit growth since its listing. The stock trimmed losses to 3.4 percent by the end of trade.
The company faces a further squeeze on profit margins as competitive pressures intensify and an expensive buildout of a new, untested 3G network weighs..
China Construction Bank shed 0.9 percent, ahead of its first-half earnings later on Friday, while Bank of China gave up 0.8 percent.
China's new bank loans are seen rebounding to about 500 billion yuan ($73 billion) in August after shrinking to 356 billion yuan in July, although banks would continue to curb lending in the second half, the official China Securities Journal said.
Dodging the downdraft, cement maker Anhui Conch jumped 6.3 percent on expectations that demand for the construction material is set to improve significantly in the second half of 2009, while cement prices are also expected to pick up.
The company reported a 2.3 percent decline in its first-half earnings on Wednesday.
SHANGHAI SLIDE TO SUBSIDE
Investors began cashing out of the highly valued market in early August amid a wave of new share offers and weakness in overseas markets but the two-week slide may be coming to an end as Chinese companies stop selling shares picked up earlier this year with money from short-term bank loans.
China Inc, especially state-owned enterprises, are seen as the main culprit behind the Shanghai sell-off as they pulled out funds temporarily parked in stocks and now using that money for its original purpose: paying for spending tied to the economic stimulus plan.
The Shanghai Composite Index finished at 2,960.771 points on Friday, down 2.8 percent for the week.
Gaining Shanghai A shares outnumbered losers by 905 to 35, while turnover for Shanghai A shares rose to 137.4 billion yuan ($20 billion) from Thursday's 121.7 billion yuan.
The index ended well above the five-day moving average, now near 2,900 points, but analysts said it was still too early to say the index had convincingly breached that closely watched technical level.
More battles between buyers and sellers are likely if the index rises further next week and heads toward the 60-day moving average, now just above 3,000, they said.
"The psychologically important 3,000 point level will be crucial in the near term," said Zhang Xiang, chief strategist at Guodu Securities.
"See-saw battles are still inevitable next week as investor confidence needs time to recover," he said, pointing to the index's dramatic 20 percent tumble in just two weeks to Wednesday's close before its technical bounce on Thursday and Friday.
China's top lender Industrial & Commercial Bank of China, the most active stock, closed up 2.3 percent on Friday at 4.86 yuan after it posted forecast-beating second-quarter earnings.
Shenzhen Development Bank gained 2.4 percent to 22.07 yuan after saying net profit in the first half rose 7.8 percent to 2.3 billion yuan.
Fundamentals appeared supportive for the market, after the index's recent tumble lowered share valuations to a more reasonable average forecast price earnings ratio of about 26 times, against this year's high of 32 times in early August.
Four small-cap shares made a firm debut in Shenzhen. Hangzhou New Century Information Technology, Bosun Tools, Tianrun Crankshaft and Accelink Technologies posting gains of 42 to 86 percent compared with their IPO prices. (Editing by Edmund Klamann and Chris Lewis)