People's Bank of China governor Zhou Xiaochuan says there is 'ample room' for further cuts to the reserve requirement ratio of the country's major lenders.
But he stressed that any such action would be more about the central bank's management of liquidity than monetary easing.
However, Zhou's comments reinforced the market's expectation that the central bank will follow up last month's cut with another reduction in the reserve ratio - the amount of cash commercial banks must hold as reserves - to free up more money for lending, after disappointing data was released over the weekend.
'In theory, there is ample room for RRR cuts. But we need to take into consideration the different restriction factors, and we need to see the advantages and disadvantages of adjustment, especially its impact on financial flows,' Zhou told a news conference on the sidelines of the National People's Congress session.
'The RRR is over 20 per cent now. We have had much lower RRRs, such as the 6 per cent in the late 1990s, and there is even lower than that in some countries,' he said.
Recent data suggests the world's second-largest economy is losing steam, raising the likelihood of more monetary easing by Beijing soon.