China's central bank says financial system stable

BEIJING (Reuters) - China's central bank said on Tuesday the country's financial system was basically stable and it would maintain prudent monetary policy, while also lowering borrowing costs and increasing the portion of direct financing in social financing.

Economic conditions were complicated and should not be underestimated, the People's Bank of China (PBOC) said in a statement published on its website.

The bank reiterated that it would continue to push forward with interest rate liberalisation and keep the yuan exchange rate at a "reasonable level", without providing details.

The bank in June issued guidelines for banks to issue large-scale certificates of deposit to individual and institutional investors, paving the way for full interest rate liberalisation.

The bank also repeated that it would maintain a prudent monetary policy and keep liquidity "appropriate".

The rapid decline of China's previously booming stock market, which by the end of last week had fallen about 30 percent from a mid-June peak, has been a major headache for top leaders, who were already struggling to avert a sharper economic slowdown.

Authorities have been rolling out rescue measures almost every day since late June to calm retail investors.

The government is due to release second-quarter gross domestic product data on July 15 and many economists expect growth to dip below 7 percent, which would be the weakest performance since the global financial crisis.

(Reporting By Winni Zhou and Nicholas Heath; Editing by Simon Cameron-Moore)