December 29, 2017 / 10:09 AM / 3 months ago

UPDATE 1-China promises to maintain 'prudent and neutral' policy

* Will use multiple policy tools to keep liquidity steady

* Will seek reasonable growth in credit and total financing

* Pledges to control “the total floodgate” of money supply (Adds details, quotes)

BEIJING, Dec 29 (Reuters) - China’s central bank pledged on Friday to maintain its “prudent and neutral” monetary policy and to use multiple policy tools to keep liquidity reasonably stable.

Analysts expect the People’s Bank of China to keep policy slightly tight in 2018 - even as that has lifted market rates to multi-year highs - to support a broader deleveraging drive to contain risks in the world’s second-largest economy.

The PBOC will seek reasonable growth in credit and social financing while effectively controlling the “macro leverage ratio”, it said on its website following a quarterly meeting of its monetary policy committee.

The central bank will “earnestly control the total floodgate of money supply”, it said, echoing top leaders at a annual economic work conference earlier this month.

In November, China’s broad M2 money supply grew 9.1 percent from a year earlier, picking up from 8.8 percent in October, the slowest pace since records began in 1996.

Central bank officials have said a slowdown in M2 growth was caused by the financial-sector deleveraging campaign, which has cooled banks’ shadow financing activities.

Still, China’s total new loans hit a record 12.94 trillion yuan ($1.99 trillion) in January-November as a crackdown on shadow lending forced banks to issue more loans for the real economy.

The central bank will also continue with interest rate and exchange rate reform, according to Friday’s statement. ($1 = 6.5050 Chinese yuan) (Reporting by Beijing Monitoring Desk and Kevin Yao; Editing by Richard Borsuk)

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