PBOC urges liquidity management

China's central bank released its fourth quarter monetary policy report on Saturday. The PBOC is urging the country's lenders to better manage liquidity while saying it will do ITS part to restrain off balance sheet and risky credit growth.

Into 2014, China's central bank is becoming more cautious in its policies. The PBOC said in its report that it would step up lending oversight in risky areas such as real estate and industries with overcapacity. The tightening of regulations comes as questions were raised about China's quickly expanding shadow banking sector in 2013. The central bank is trying to rein in an explosion of off-balance sheet lending and make sure financial institutions support the real economy rather than speculative activity.

The PBOC is also trying to limit the accumulation of local government debt. Official data shows that China's local governments debt stood at about $3 trillion as of the end of June 2013. The bank said in its report that it will explore the use of market mechanisms to resolve problems in the area.

On a more macro level, the PBOC noted in its report that the economy is likely to remain stable but the base for solid growth hasn't yet solidified because it's still dependent on investment. The bank also reiterated plans to advance reforms to interest rates and the currency exchange rate system, to promote a deposit insurance system, and strengthen communications with markets and the public.