Chinese PM Li Keqiang assures 'appropriate liquidity' in 2014

Chinese Premier Li Keqiang has said that the government will keep liquidity at an appropriate level in 2014 to maintain the stability of financial markets and the broader economy.

He made the remarks during a recent inspection tour to the northern Chinese city of Tianjin, according to an account published on the website of the State Council, China's cabinet, late on Sunday.

The comments came after cash crunches in China's money markets in June and December, which many market observers believe were engineered by the central bank, which refused to aid the market with large cash injections to help banks cope with elevated cash demand at the end of each quarter.

Market watchers interpreted the People's Bank of China's (PBOC) passive approach as short-term interest rates spiked as an effort to help curb non-stop growth in housing prices and a message to banks to de-leverage their balance sheets. Some have perceived an unofficial shift to tighter monetary policy.

"We will stick to the prudent monetary policy, keep appropriate liquidity, realise reasonable growth in credit and total social financing and keep prices largely stable," Li was quoted as saying in the statement.

"We have the conditions to keep the economy to operate in a steady style and maintain the stability of the financial markets," Li said without elaborating."

President Xi Jinping and China's other new leaders, who took power in March, have said they want to adjust the country's policy priorities to value growth quality over quantity, sacrificing some growth in exchange for balanced growth and protection against financial risks.

China's economic growth is likely to come in at 7.6% this year, according to a cabinet report cited by the official Xinhua news agency last week, just above the government's target of 7.5% and slightly below last year's 7.7%.

Sources at top government think tanks told Reuters that for 2014, China will likely use the same 7.5% growth target it set for this year.