China central bank says to keep policy neutral, liquidity stable

BEIJING (Reuters) - China's central bank said on Friday that it would keep its monetary policy neutral and "neither too tight nor too loose" to help maintain stable liquidity conditions.

At a key economic meeting this month, Chinese leaders pledged to implement "prudent and neutral" monetary policy in 2017 to help contain financial risk, while keeping the economy on a path of stable growth.

While reaffirming a long-standing commitment to prudent policy, the central bank said it will pay more attention to maintaining a "neutral" stance and ensure that it is "neither too tight nor too loose"."

The People's Bank of China (PBOC) will keep liquidity basically stable by flexibly using various policy tools, it said in a statement summarizing the fourth quarter monetary policy committee meeting.

"At present, China's economic and financial operations are generally stable, but the complexity of the situation cannot be underestimated," the central bank said.

Policy insiders expect monetary policy to tilt towards slight tightening in 2017 as top leaders struggle to strike a balance between supporting the economy with flush credit and preventing a destabilising build-up in debt.

Central bank adviser Sheng Songcheng told Reuters in an interview on Thursday that interest rates in China are already on an upward trend as the economy improves.

The PBOC said it will push reforms of the yuan regime, while keeping the currency basically stable.

The yuan, which has reached an 8-1/2 year low, was on course to shed nearly 7 percent against the dollar in 2016, on track for its biggest annual fall since 1994.

(Reporting by Beijing Monitoring Desk and Kevin Yao; Editing by Richard Borsuk)