China's new bank lending shrank in May and money supply grew at the slowest pace since 2008, signifying the effects of the country's tightening measures are paying off.

New bank lending, an important indicator of the monetary policy, tumbled to 551.6 billion yuan (84.86 billion U.S. dollars) in May from April's 739.6 billion yuan, the People's Bank of China said on Monday.

The figure was also 100.5 billion yuan less than that of last May, the central bank said.

Yuan-denominated loans outstanding at the end of May were 50.77 trillion yuan, 17.1 percent higher than a year ago.

By the end of May, the broad money supply (M2), which covers cash in circulation and all deposits, hit 76.34 trillion yuan, up 15.1 percent year-on-year.

The rise of M2, following an increase of 15.3 percent in April, was the the slowest growth since November of 2008. May was the third consecutive month that the country registered slower M2 growth.

The narrow measure of money supply, cash in circulation plus current corporate deposits, rose 12.7 percent from a year earlier to 26.93 trillion yuan. The increase was 17.2 percentage points lower than the same period of last year.

"The May monetary data suggests the prudent monetary policy is bearing fruit," said Zhuang Jian, senior economist with the Asian Development Bank.

Zhuang noted that cutting credit supply will help check the monetary factors that fuel consumer prices and ease stubbornly-high inflationary pressures.

China's consumer price index (CPI), a main gauge of inflation, climbed 5.3 percent in April from a year ago, following March's 5.4-percent rise.

It is widely expected that May's CPI growth, due to be released Tuesday, will exceed 6 percent as drought in the country's east and south, as well as other natural disasters, have further pushed up food prices.

The government regards countering price hikes as a top priority for this year's macroeconomic regulation and has adopted a series of tightening measures, with an annual inflation control target of 4 percent.

To ease soaring prices, the central bank has raised interest rates twice this year and hiked the reserve requirement ratio for banks five times.

Analysts said the monetary data was the latest indication that the government's tightening policies have crimped economic activity, following a survey showing slower manufacturing activities, falling car sales and sharply lower industrial output growth in April.

The economic data report for May, scheduled for release Tuesday, is expected to provide more evidence of slowing economic growth, they said.

Concerns about a slowing economy and the tightening measures have dragged China's key Shanghai index down 11.97 percent from this year's peak on April 18.

Economists are split as to whether the government should maintain the pace and power of current monetary policy.

Xia Bin, a member of the central bank's monetary policy committee, said China must stick to the prudent monetary policy to soak up the excessive liquidity.

Although the tightening will moderately slow economic growth, the moderate slowdown does not mean the economy will slide toward a "hardlanding," Xia said.

Zhuang also suggested maintaining the monetary policy stance to consolidate the regulation results, adding that minor changes should be made according to economic development.

However, Zhao Qingming, senior researcher with China Construction Bank, said the monetary data of May indicates a slowdown in growth and policy makers should observe the situation before further tightening.