No large stimulus for nation: PBOC governor

China will not launch any large-scale stimulus to bolster its economy, central bank governor Zhou Xiaochuan was reported as saying over the weekend, in response to market speculation that policymakers might lower reserve requirements for banks to spur economic growth.

Zhou was reported by China National Radio as speaking at a closed-door session in Tsinghua University on Saturday that the central bank would only "fine-tune" market liquidity to counter economic cycles of downturn.

He did not elaborate though on whether a fine-tuning includes use of a lowered reserve requirement ratio (RRR).

There has been market concern that China may cut the amount of cash that commercial banks place with the central bank as reserves to prop up its economic growth.

A cut of 0.25 percentage point of the RRR is estimated to inject 300 billion yuan ($48.9 billion) into the market, making more credit available to corporates.

The central bank already announced on April 22 it would trim RRR by 2 percentage points for county-level rural commercial banks and 0.5 percentage point for rural credit cooperatives, as part of attempts to increase lending to the agricultural sector.

The overall RRR for large commercial banks however remains intact at 20 percent.

Zhou's remarks cannot dismiss the possibility of a lower RRR, Xu Bin, research director at Beijing-based Qilin Venture, told the Global Times.

A cooling economy dragged by a sluggish home market makes RRR cuts an option, according to Xu.

The property sector has long been the major growth driver of China's economy.

About one-third of the country's credit has flown directly or indirectly to the property sector either through bank loans or off-balance-sheet shadow banking activities, Xu said, indicating that a crippled housing market will result in rising bad debts and defaults on investment products.

"We maintain our view that growth will slow to 7.1 percent year-on-year in the second quarter, dragged down mainly by the property sector," Zhang Zhiwei, chief China economist at Nomura Securities, told the Global Times in a research note on Sunday.

China posted 7.4 percent GDP growth in the first quarter compared with a year earlier, 0.1 percentage points lower than the official target.

There have been numerous reports this year of home price falls in small cities, and even discounts in first tier cities.

Tongling in East China's Anhui Province, and Ningbo in East China's Zhejiang Province are among many smaller cities that have eased curbs on home purchases amid falling prices.

Other economists hold different opinions. The central bank is optimistic about the world's economy as indicated in its latest report, and a RRR cut is not justified unless the economic situation gets worse, Peng Wensheng, economist of China International Capital Corporation, wrote in a report on Thursday.