View of the People's Bank of China in Beijing. Photo: AFP/Wang Zhao
View of the People's Bank of China in Beijing. Photo: AFP/Wang Zhao

China’s central bank said on Tuesday that it would continue to implement a prudent and neutral monetary policy, and keep liquidity in the country’s financial system basically stable.

The People’s Bank of China (PBOC) switched to a modest tightening stance at the start of this year to help cool explosive growth in debt, but it injected substantial liquidity last month to avoid a quarter-end cash crunch, market participants said.

The PBOC will use various policy tools to maintain stable liquidity and will guide reasonable growth in money supply, credit and social financing, it said in a statement summarising the second-quarter monetary policy committee meeting.

The central bank also said the country’s economic and financial operations were basically stable, but it would closely monitor changes in international capital flows.

The global economy is recovering gradually but some emerging economies still face challenges and there are “risks and hidden dangers” in international financial markets, it said.

The central bank injected a net 99.5 billion yuan (US$14.65 billion) into the financial system via short- and medium-term liquidity tools in June, up 95% from the previous month, to ease tight cash conditions.

The central bank will hold off on further policy tightening and could even slightly loosen its grip in coming months as a deleveraging drive threatens economic growth and job creation ahead of a leadership reshuffle, policy insiders said.

The central bank reaffirmed that the yuan would remain basically stable and pledged again to continue pushing forward on interest rate and exchange rate reforms.