METALS-Copper drops to three-week low, China policy a concern

* LME copper recovers from two-week low

* Gains expected to be limited

* China end-use demand slow to recover after holiday -CRU

* Coming up: U.S. new home sales at 1500 GMT

(Updates prices, adds comment) LONDON/SYDNEY, Feb 26 (Reuters) - Copper prices slipped to a three-week low on Wednesday as worries about credit curbs on top consumer China's property developers fed into wider concerns about global demand for the metal. Three-month copper on the London Metal Exchange dropped to a session low of $7,028 a tonne in intraday trade, its lowest level since Feb. 5. It recovered slightly to $7,040 a tonne at 1555 GMT, down from a close of $7,064.50 on Tuesday. China accounts for more than 40 percent of global consumption of copper, which is used extensively in construction and power cables. Any curbs to financing and property development are likely to erode that demand. The official Shanghai Securities News reported on Monday that Industrial Bank and other banks may have stopped extending some loans to property developers and tightened lending to other property-related sectors, such as steel, cement and construction. "The market is very nervous, and any negative news coming out of China is having a significant impact on base metal prices," said Nic Brown, head of commodity research at Natixis. China's corporate debt has hit record levels, and credit repayment problems are likely to rise, triggering restructurings and more defaults. The appeal of copper imports, often used to finance property investments, was also blunted by falling property prices, said Chunlan Li, an analyst at Beijing-based consultancy CRU. "Worries about risks to the Chinese economy are pushing prices down. At the same time, demand has not resumed after the holiday. Operating rates at end-users are still not very good," she said. A metals broker in Hong Kong said that traders were waiting for the right price, with more buying interest possible if prices touch $7,000 again. For now, traders have shown limited appetite for physical metal in China. Stockpiles have jumped because of record January imports, and premiums for metal in bonded warehouses fell by $5 this week to $160-$180, according to China price provider Shmet. (http://www.shmet.com/)

PRICES Three month LME copper Most active ShFE copper Three month LME aluminium Most active ShFE aluminium Three month LME zinc Most active ShFE zinc Three month LME lead Most active ShFE lead Three month LME nickel Three month LME tin ($1 = 6.1266 Chinese yuan)

(Editing by David Evans and Jane Baird)