July 2, 2012 / 10:11 AM / 5 years ago

China vows to contain financial risks amid reforms

BEIJING, July 2 (Reuters) - China will step up efforts to curb financial risks as it continues with reforms to make country's interest rates and currency regime more market-driven, the central bank said on Monday.

"We will further deepen key reforms, including those on market-oriented interest rates and the formation of its exchange-rate mechanism, to create a sound environment for maintaining relatively stable and fast growth," the central bank said in a brief summary of its 2012 financial stability report.

It has yet to publish the full report.

China's top policymakers, including central bank chief Zhou Xiaochuan, expressed determination on Friday to push on with their campaign to reform and rebalance the world's second-largest economy even as growth cools.

China's economy faces a host of internal and external challenges in 2012, the central bank said in the statement published on its website, www.pbc.gov.cn.

China will encourage financial firms to innovate while enhancing risk-control ability and regulators will "keep a close eye on risks of non-financial institutions with financial functions", the central bank added.

The central bank will improve its "counter-cyclical" macro-prudential policies to prevent systemic risks in the economy.

Analysts warn that China's slowing economic growth could push more companies, including those run by local governments, to the brink, which could in turn fuel a rise in bad bank loans.

China's annual economic growth is almost certain to dip below 8 percent in the second quarter -- the sixth straight quarter of slower growth as demand at home and abroad slackens.

Reporting by Kevin Yao; Editing by Richard Borsuk

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