China will adjust its monetary policy in light of data showing continued excessive credit and investment growth, the central bank chief said yesterday.

"There will be fine-tuning (measures) and we will strengthen open market operations," Zhou Xiaochuan, governor of the People's Bank of China, told reporters at a forum co-hosted by Bank of Communications and its partner HSBC.

He did not elaborate on specific measures, however.

The central bank has already begun draining cash from the financial system by raising lending rates and selling bills to selected banks.

Although figures show money supply, loans and investment continued to surge in May, tightening measures adopted by the central bank have had some effect, said Chen Jijun, an analyst with CITIC Securities.

"The growth might be higher if the government had not raised the one-year benchmark lending rate by 27 base points," he said.

New loans in May were nearly double those of the same month a year earlier.

"Within the next one or two months, the government may continue to monitor the results of its previous measures and strengthen the implementation of these measures, instead of taking further moves very soon," Chen said.

Issuing special bills has been one of the major means of controlling the surge in loans, vice-governor  of the central bank Wu Xiaoling said on Wednesday.

The central bank sold 100 billion yuan (US$12.5 billion) worth of one-year bills to selected banks, with the yield at 2.1138 per cent, much lower than the 2.4800 per cent in its regular sale of one-year bills this week.

This measure is expected to have more impact than a similar move taken a month ago.

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