China's central bank said on Tuesday that it will "fine tune" policy to cushion the economy against global risks while closely watching the possible impact from recent policy loosening in the United States and Europe.
"We will continue to implement prudent monetary policy, make policies more targeted, flexible and forward-looking, while fine tuning policy according to the economic situation," the central bank said in a statement after its third-quarter monetary policy meeting.
"We will use various policy tools to guide the steady and appropriate growth in money and credit and maintain reasonable social financing aggregate," the central bank said, adding that it will improve financial resource allocation and resolve the structural distortions in credit supply and demand.
Many smaller Chinese firms, the key driver of economic growth and job creation, remain starved for cash as commercial banks still favour large, state-backed companies.
China's economy has showed signs of stabilsing while the trend of inflation remains stable, the central bank said in the statement posted on the bank's website: (www.pbc.gov.cn).
"The current economic and financial performance shows signs of stabilising and the price situation is basically stable," it said.
"Global economic growth remains weak and we need to closely watch the impact of recent rescue and stimulus measures taken by European countries and the United States."
Across Asia, central banks are wary about the potential inflationary impact of the Federal Reserve's latest quantative easing, dubbed QE3, as well as policy stimulus unveiled by the European Central Bank.
Under the banner of policy 'fine-tuning", China's central bank cut interest rates twice in June and July and lowered banks' reserve requirement ratio (RRR) three times since late 2011, freeing an estimated 1.2 trillion yuan for boosting loans.
But it has refrained from cutting interest rates or RRR since July, despite further signs that demand at home and abroad is cooling. Instead, it has opted to inject short-term cash via its open market operations into money markets to ease credit strains.
Housing prices rebounded on a monthly basis for the second straight months in July, following eight consecutive months of declines, while annual inflation accelerated to 2 percent in August from a 30-month low of 1.8 percent in July.
But analysts still expect further policy easing in the coming months as the global economy remains sluggish and Europe's debt crisis drags on.
The government also appears to be leaning more on fiscal policy to support growth.
Earlier this month, the National Development and Reform Commission (NDRC), the top economic planning agency, approved over $150 billion worth of infrastructure projects to cushion the economy against stiff global headwinds.
The central bank also said it will continue to promote two-way moves in the yuan exchange rat.