Zhou Xiaochuan, governor of the People's Bank of China (PBOC), said Friday that China will continue to maintain a prudent monetary policy while fine-tuning it in response to the country's economic slowdown.

China's economy is expected to bottom out in the second quarter of the year and pick up its pace in the second half after experiencing a slowdown since last year.

The loose monetary policy China previously adopted to tackle the global financial crisis created high inflation and asset bubbles. Policies were subsequently tightened to combat the bubbles. Retreating inflation, however, has provided more room for policy easing to spur growth.

The central bank has cut the reserve requirement ratio three times since late last year, as well as lowered benchmark interest rates for the first time in four years on June 7.

While addressing the opening of the Lujiazui Forum, an annual financial conference held in Shanghai, Zhou said the PBOC will forge ahead with financial reforms to encourage the financial industry to better serve the real economy.

The central bank will stick to reforms related to interest rates, exchange rates and yuan-based cross-border transactions, he said.

The central bank surprised the market on June 7 by allowing banks more freedom in setting deposit rates for the first time, a significant step towars the liberalization of interest rates.

In April, the PBOC doubled the daily trading band of the yuan against the U.S. dollar to one percent. It is also actively pushing for more cross-border trade settlements to be conducted using the yuan.

Zhou said more should be done to guard against systematic risks in order to help China better cope with the global financial crisis and eurozone debt crisis.