China's new yuan loans rebound in May

China's new yuan-denominated lending amounted to 870.8 billion yuan (141.56 billion U.S. dollars) in May, rebounding from the previous month and bettering market estimates.

The volume was higher than the 774.7 billion yuan recorded in April and up 201.4 billion yuan on a year-on-year basis, said the People's Bank of China (PBoC) in an online statement on Thursday.

M2, a broad measure of money supply that covers cash in circulation and all deposits, increased 13.4 percent year on year to 118.23 trillion yuan at the end of May.

The growth pace was 0.2 percentage points higher than the previous month but 2.4 percentage points down from a year ago.

The narrow measure of money supply (M1), which covers cash in circulation plus demand deposits, expanded 5.7 percent to 32.78 trillion yuan as of the end of last month.

Meanwhile, China's total social financing aggregate, a broad measure of liquidity in the economy, came in at 1.4 trillion yuan in May, up 217.4 billion yuan year on year but 145.4 billion yuan less than the previous month.

Last month's increase in new yuan loans reversed the decline in April and gave encouraging signs of national economic growth, as the central bank implemented targeted easing measures to support the real economy.

The country's economy grew by 7.4 percent in the first quarter this year, down from 7.7 percent in the fourth quarter of 2013 and marking the lowest quarterly growth since the third quarter of 2012.

Zhong Zhengsheng, a macro economy analyst with Guosen Securities, attributed the higher-than-expected increase in money supply to recent fiscal and monetary measures released by the central government.

The Ministry of Finance has asked local governments to accelerate spending, while the central bank announced an array of targeted cuts to the reserve requirement ratio for banks engaged in proportionate lending to agricultural and small firms.

Zhong's words were echoed by Zhang Zhiwei, an economist with Nomura Securities, who added the rise in money growth was also the result of loans provided by the PBoC to the China Development Bank via the re-lending facility.

Data from last month also showed the financial sector has served the real economy better under a series of pro-growth measures, Zhong said.

Loans to non-financial enterprises and other sectors increased by 558.6 billion yuan in last month, higher than 494.8 billion yuan in April, with 62.3 percent of which were medium- and long-term loans, also up substantially from April.

Zhang expects further easing measures in the next few months to help stabilize GDP growth. Nomura Securities raised its forecast of China's full-year GDP growth to 7.5 percent on June 3.