BEIJING (Reuters) – China’s central bank said on Sunday it will step up counter-cyclical adjustments to support the economy and make monetary policy more flexible to fend off financial risks.

The first-quarter monetary policy implementation report from the People’s Bank of China (PBOC) did not repeat the central bank’s long-standing vow to refrain from “flood-like” stimulus to support growth, reinforcing signs of more policy measures.

China’s long-term stable economic trend remains unchanged, despite the coronavirus outbreak, the central bank said.

“But at present, challenges faced by China’s economic development are unprecedented, we must fully consider difficulties, risks and uncertainties,” it said.

The bank said it will keep liquidity ample, using both aggregate and structural policy measures, and continue to deepen interest rate reforms to help lower borrowing costs and allocate financial resources more efficiently in the economy.

The central bank will also support the real economy, especially small and medium-sized enterprises, it said.

“We should properly handle the relationship between stabilizing growth, ensuring employment, adjusting structure, preventing risks and controlling inflation,” the PBOC said.

China’s economy contracted 6.8% in the first quarter from a year earlier, shrinking for the first time since at least 1992, as the coronavirus outbreak paralysed production and spending, raising pressure on authorities to do more to stop mounting job losses.

The PBOC has already rolled out a raft of easing steps since early February, including cuts in reserve requirements and lending rates and targeted lending support for virus-hit firms.

The central bank will continue to deepen the reform of the loan prime rate (LPR) regime and improve the monetary policy transmission mechanism to help lower borrowing costs, it said.

In August 2019, PBOC overhauled the benchmark lending rate mechanism by using the market-driven LPR to replace the previous benchmark bank lending rate.

It will keep growth of M2 and social financing in line with and slightly higher than nominal GDP growth, it said.

It will deepen foreign exchange market reform, maintain yuan flexibility and keep the yuan basically stable, it said.

China will also develop its financial markets to fuel growth and economic restructuring, the central bank said.

The government will support fundraising by private firms through equity financing and bond sales, part of efforts to reduce the economy’s excessive reliance on bank lending.

Meanwhile, PBOC said it would promote “systemic” opening of its bond market, and will introduce more long-term investors.

To protect investors, regulators will seek to unify disclosure rules for various types of credit bonds and improve the mechanism to deal with bond defaults.

PBOC also vowed to foster a resilient, competitive and inclusive financial system, and continue to improve corporate governance at major financial institutions including commercial banks.