China's central bank says it will make lending policies more flexible to sustain growth in the world's fourth-largest economy.

Global uncertainties mean greater flexibility is needed "to help cushion against various potential shocks," the People's Bank of China said on its Website yesterday.

China has already loosened loan quotas to help exporters and small businesses after four quarters of slowing economic growth, Bloomberg News said.

The bank said it was seeking to better balance the need to curb inflation and efforts to sustain "stable and relatively fast growth".

"The central bank will have to relax loan controls further toward the end of this year as the economy faces an increasing risk of a bigger slowdown," said Wang Qian, an economist at JP Morgan in Hong Kong.

China's economic growth cooled to a 10.1 percent annual rate in the second quarter from 10.6 percent in the three months through March.

The central bank told financial institutions to ensure that more new loans are channeled to farmers, small businesses and earthquake reconstruction this year. It didn't define "flexibility" in lending policies.

Curbing consumer-price gains is a "prominent" task and "fundamental" to maintaining growth, the bank said. Overall lending controls will be maintained, it added.

In July, the central bank eased 2008 lending quotas for national banks by 5 percent and regional lenders by 10 percent, according to reports by Goldman Sachs, BNP Paribas, China Merchants Bank Co, and Industrial Bank Co.

Chinese banks must use increased quotas to lend to small and medium-sized companies, the nation's banking regulator said on August 28. The fastest lending growth should be for agricultural production and rural infrastructure construction, the central bank said on its Website yesterday.

Inflation eased to 6.3 percent in July from 8.7 percent in February, the fastest pace in 12 years.

(Shanghai Daily September 2, 2008)