People's Bank of China warns of rising economic risks as it pledges to fine-tune policies

The People's Bank of China has warned that downside risks in the mainland economy may intensify, while adding that it would use flexible tools to maintain proper liquidity and credit growth.

It also confirmed, for the first time, media reports on its use of a new instrument called a medium-term lending facility for liquidity injection - worth 769.5 billion yuan (HK$976 billion) in the past two months - to lower borrowing costs.

"The downward pressures and potential exposure to risks in the economy may increase somewhat over a certain period of time during the course of economic restructuring," the central bank said in its third-quarter monetary policy report issued yesterday.

It said it would "promote steady economic growth, while also preventing excessive 'liquidity ushering' from exacerbating a distorted economic structure, pushing up inflation and debt levels".

It pledged to fine-tune its policies based on changes in economic fundamentals, flexibly make use of multiple tools to adjust liquidity, and promote "reasonable growth" in credit and social financing.

The comments indicate the central bank's monetary stance will stay accommodative to ensure gross domestic product growth will not slump after cooling to a five-year low of 7.3 per cent in the third quarter, but rule out any massive easing after the leadership signalled the need to transform the economy's growth model.