New bank lending in China rebounded far less than expected in May, and some key money gauges hit record lows, suggesting the world's second-largest economy continued to face headwinds even as the central bank seeks to bolster confidence.

Chinese banks issued 950 billion yuan in new loans last month, compared to 730 billion yuan in April, according to Reuters' calculations based on the latest data from the People's Bank of China (PBOC) released on Friday.

Analysts polled by Reuters had predicted loans would rise to 1.255 trillion yuan but would still be below the 1.36 trillion yuan issued in May last year.

"China’s credit extension came in lower than expected in May, suggesting that the deleveraging in the households continues," said Zhou Hao, chief economist at Guotai Junan International.

But Zhou said China's central bank may be reluctant to cut interest rates any time soon, as that could lead to further depreciation of the yuan as the US Federal Reserve seems in no hurry to start cutting its rates, which is buoying the dollar.

"Balancing all the factors, we think that the PBOC would refrain from policy rate cuts for now but provide more targeted support via relending programmes over the foreseeable future," he said. (Reuters)