China will maintain a prudent monetary policy in 2007, said central bank governor Zhou Xiaochuan in his New Year address.

The central bank will strengthen foreign exchange management this year and push forward financial reforms to maintain the stability of the financial system, said Zhou.

He said the bank had striven to restrict the growth of monetary credit to a reasonable level last year and had sped up the reform of state-owned commercial banks.

According to the People's Bank of China (PBoC), Chinese banks lent 2.97 trillion yuan (380.76 billion U.S. dollars) in the first 11 months last year, far above the government's target of 2.5 trillion yuan. Total new loans for 2006 will reach the highest level since 2003.

The monetary policy commission of the PBoC said at a recent meeting that in the first few months of 2007, China should restrict loan growth to a reasonable pace and optimize loan structure.

Last year, the central bank improved the yuan exchange rate formation mechanism and kept the yuan exchange rate floating in a disciplined manner within a reasonable range, said Zhou.

The value of the Renminbi, or Chinese yuan, has risen nearly 3.86 percent since China's reform of the exchange rate system on July 21, 2005.

A Xinhua Economic Analysis Report released on Monday predicts the exchange rate of the Chinese currency will appreciate by some 5 percent against the U.S. dollar in 2007 to reach 7.44 yuan.

Monetary policy aims to stabilize RMB prices but also to expand domestic consumption, prevent investment from growing too fast, and promote a more balanced international payment situation, according to the PBoC commission.

Source: Xinhua