China will stick to prudent monetary policies and use targeted measures to step up support for the real economy and boost lending for small firms, the country’s central bank said on Jan 9.

“The central bank will avoid damaging the real economy with too fast credit shrinkage while refraining from indiscriminate easy credit,” Yi Gang, the governor of the People’s Bank of China (PBOC), told a joint media interview on Jan 8.

The PBOC will continue to use the countercyclical factor to stimulate the economy. The factor is a tool used to hedge market’s cyclical fluctuations.

Last week, the PBOC announced lowering the reserve requirement ratio for banks, which would release 1.5 trillion yuan’s liquidity from mid-January.

It will roll out this year’s first targeted medium-term lending facility (TMLF) in late January, a targeted policy tool to spur lending to small and private firms, Yi said.

“Structural monetary policies will be taken to boost the vitality of firms, small- and micro-sized enterprises in particular, and incentives will be given to banks to encourage lending to the real economy,” Yi said.

The central bank will make full use of credit, bonds and equities to help private firms raise funds, and work with other government agencies to improve companies’ access to financial support.

China will also press on with its structural deleveraging as financial risks exposed earlier have been dealt with in an orderly way, according to Yi.