RTTNews - The Chinese central bank said it will maintain a moderately loose monetary policy. In a report released on Wednesday, by the People's Bank of China pledged to adopt market tools to guide the appropriate growth in credit growth.

The central bank released the statement late Wednesday after the Chinese stock market recorded its largest one day decline in nearly eight months on concerns that government may require banks to limit lending.

Deputy Governor of the central bank, Su Ning said the PBoC will unswervingly continue to implement appropriately loose monetary policy and consolidate the momentum of economic recovery. He added, We should focus on market oriented tools rather than quantitative style measures, flexibly using various monetary policy tools to promote appropriate monetary and credit growth.

The central bank added that a proactive fiscal policy and moderately loose monetary policy are required to sustain growth.

In June, renminbi loans surged CNY 1.53 trillion, an acceleration of CNY 1.2 trillion from the previous year. At end-June, outstanding renminbi loans increased 34.44% annually to CNY 37.74 trillion.

Earlier in July, Assistant Governor, Li Dongrong said domestic and international economic and financial conditions are posing new challenges. Li added that the central bank will continue to improve financial support for the economy.

According to PBoC, Chinese inflation could bottom out at the end of the third quarter before rebounding. Chinese regulators warned that fresh asset bubbles are forming in the economy and ordered banks to ensure unprecedented volumes of new loans are channeled into the real economy and not diverted into equity or real estate markets, reports said on July 28.

In response to recent decreases in global crude prices, Chinese government reduced gasoline and diesel prices by 220 yuan per tonne from July 29. This follows two big increases in June, which took prices to a record high. After the cut, retail prices of gasoline will drop by about 0.16 yuan per liter. Diesel prices would be lower by about 0.19 yuan per liter.

After concluding its Article IV consultation with the People's Republic of China, the Executive Board of the International Monetary Fund said rapid and vigorous policy response helped the country to mitigate the economic downturn and facilitate an economic recovery during the course of this year and into 2010. However, IMF officials urged China to take more reforms as demand continued to remain sluggish.

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