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SHANGHAI, Feb 18 (Reuters) - Foreign investors trimmed their positions in China onshore yuan bonds in January, driven by a record widening of the yield gap between the United States and China.

Foreign institutions held 4.14 trillion yuan ($568.70 billion) in bonds traded on China's interbank market as of end-January, the central bank's Shanghai head office said, down from 4.16 trillion yuan a month earlier.

Foreign investors reduced their holdings of government bonds by 40 billion yuan, while increasing interbank deposits by 30 billion yuan.

Demand for safe-haven assets pushed Chinese yields to record lows, with the yield gap between U.S. and Chinese 10-year treasuries reaching a record high of 300 basis points in January.

Meanwhile, short-term rates, such as 1-year negotiable certificates of deposit (NCDs) have jumped this year, even surpassing 10-year yields, indicating tight funding conditions among banks.

Analysts at China Merchants Securities noted that the "Two Sessions" would be a key period to monitor for changes in funding conditions, as this is typically when funding tends to ease.

Parliamentarians and political advisers gather in Beijing every March for two parallel sets of meetings called the "Two Sessions", and investors are closely watching for announcements on key economic growth targets and potentially more stimulus for the sputtering economy.

($1 = 7.2797 Chinese yuan renminbi)

(Reporting by Shanghai Newsroom, editing by Ed Osmond and Kim Coghill)

((Li.Gu@thomsonreuters.com;))