PBOC governor says China capable of achieving growth target

China will maintain a prudent monetary policy and rule out the possibility of loosening substantial credit to stabilize growth, the central bank's governor said on Saturday.

Speaking at the news conference in Beijing, Zhou Xiaochuan, governor of the People's Bank of China (PBOC) said that China is capable of achieving its growth target through improving economic efficiency and innovation.

Zhou stressed that the monetary policy will be flexible to counter the potential impact from unexpected and sharp volatilities in both domestic and international markets.

Concerns have emerged that the Chinese economy may face the issue of economic stagflation, a situation where inflation is high but economic growth remains slow, after the country saw a bigger-than-expected expansion of inflation in February.

The consumer price index, a main gauge for inflation, rose by 2.3 percent, primarily driven by soaring food prices.

Some economists say that China is facing daunting challenges in its macroeconomic policies this year as the economic slowdown requires monetary easing but excessive loosening that will further drive up the debt burden on Chinese companies and spur speculative bubbles in the property market.

Zhou said the PBOC will follow the economic indicator on inflation closely, as it's a factor that may affect the interest rate policy of the monetary authority.

New loan growth in February was 726.6 billion yuan ($111.9 billion), sharply contracted from the record amount of 2.51 trillion yuan in the previous month, according to official data.