BEIJING - Stocks on the Chinese mainland rose the most in three months after new lending and money supply figures exceeded estimates in December, boosting speculation the government is relaxing monetary policy to bolster economic growth.

China Merchants Bank Co and China Construction Bank Corp (CCB) led gains for lenders after the money supply grew at the fastest pace since July.

China Shenhua Energy Co Ltd, the nation's largest coal producer, advanced the most in 10 months on expectations new loan growth will boost demand for commodities.

Anhui Conch Cement Co Ltd climbed 5.6 percent after the Xinhua News Agency said the banking regulator will ensure demand for loans for the construction of affordable housing.

"It shows the government's policy of fine-tuning monetary policies is taking effect," Ha Jiming, vice-chairman for China at Goldman Sachs Group Inc, said. "The government is able to engineer a soft landing, maintaining economic growth at about 8 percent. The market this year will have some opportunities."

The Shanghai Composite Index gained 62.50 points, or 2.9 percent, to hit 2,225.89, its biggest advance since Oct 12. The CSI 300 Index jumped 3.4 percent to 2,368.57.

The Bloomberg China-US 55 Index, the measure of the most-traded US-listed Chinese companies, retreated 1.4 percent on Friday in New York.

The Shanghai Composite rose the most in Asia on Monday, lifting the gauge's valuations to 9.1 times estimated earnings from a record low of 8.9 times reached on Friday, according to weekly data compiled by Bloomberg.

The index slid 1.6 percent in the first trading week of the year on concern a credit crunch will hurt corporate profits, extending a 22 percent plunge in 2011.

China's benchmark money-market rate had the biggest weekly decline since November last week as the central bank refrained from selling bills to help ease a cash shortage ahead of the week-long New Year public holiday starting Jan 23.

Chinese stocks are on the "brink of capitulation" after more than 100 stocks in the Shanghai and Shenzhen exchanges plunged by the maximum daily limit last Thursday, according to China International Capital Corp.

This is "one of the signs of market panic", Hao Hong, CICC's Beijing-based global equity strategist, said in a report. He said the market is "near-term oversold" and may see a "fleeting technical rebound" after China's December lending and money supply growth figures are released.

New loans totaled 640.5 billion yuan ($101 billion) last month, the highest amount since April, the People's Bank of China said on Sunday. That exceeded the estimates of all 18 economists surveyed by Bloomberg.

M2, a measure of money supply, rose 13.6 percent, the fastest pace since July, it said. That compared with the 12.9 percent median of 18 estimates.

CCB, the country's second-largest bank, gained 1.9 percent to reach 4.74 yuan (75 US cents). Merchants Bank rose 3.3 percent to reach 12.38 yuan. China Minsheng Banking Corp, the first privately owned bank, advanced 2.5 percent to reach 6.18 yuan.

Premier Wen Jiabao called for measures to boost confidence in the stock market, the Shanghai Securities News reported on Monday, citing his comments at the National Financial Work Conference.

He urged reforming IPOs and improving companies' dividend payouts, according to the report.

The China Securities Regulatory Commission is studying measures to curb IPO speculation, the Shanghai Securities News reported on Monday, citing the regulator's assistant chairman Zhu Congjiu. The measures might include allowing institutional investors to buy more IPO shares, it said.

Wen's call "will help" equities recover from a two-year slump, according to the head of UBS AG's China operations.

His comments signal the government may take more measures to boost stocks, including allowing social security funds to buy equities, David Li, UBS chairman and country head for China, said in an interview in Shanghai. Funds may flow out of the property market and into stocks as the government isn't showing any inclination to ease curbs in the real-estate industry, he said.

Bloomberg News