(Yicai Global) June 29 -- China should strengthen its economic resilience while fine-tuning its mechanism of setting a deposit rate ceiling, the central bank said after its quarterly monetary policy meeting.

The People's Bank of China mentioned optimizing deposit rate supervision in the statement published on its website yesterday after the monetary policy committee convened on June 25. The topic was new as it wasn't included in the first-quarter statement.

On June 21, the PBOC changed its system so that commercial banks can add a certain number of basis points to the loan prime rate that is reviewed around the 20th day of every month. The specific rules have not been published yet.

The regulation shift will help promote the steady progress of the deposit rate market reform under the self-disciplinary mechanism, said macro analyst Zhou Maohua.

After the reform, the market will more accurately reflect supply and demand, maturity, and risk premium, Zhou added. That means that individual banks and different products with varying maturities can carry different rates, he said, adding that the rates will remain reasonable.

China will improve the market-based interest rate formation and transmission mechanism, continue unleashing the potential of the LPR reform, and promote further reductions in real loan interest rates, the PBOC statement read, similarly to the first-quarter release.

Risk Prevention 

China should implement monetary policy flexibly and accurately, strike a balance between economic rejuvenation and risk prevention, and promote economic recovery to a higher level of equilibrium, the central bank reiterated.

The gap of economic recovery between different countries is widening significantly, which may add uncertainties, said Wen Bin, chief researcher at China Minsheng Bank.

Inflation is expected in the US, said Wen. That's why China should keep a close eye on the US Federal Reserve's monetary policy moves, he added. 

A prudent monetary policy must be flexible, precise, reasonable, and appropriate, according to the PBOC. China should maintain sufficient liquidity, keep the money supply and the growth rate of social financing scale in line with nominal economic growth, and retain a stable macro leverage ratio, it added.

Editor: Emmi Laine, Xiao Yi