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China c.bank says 'rich' policy tools ensure it can cope with uncertainties

BEIJING, May 10 (Reuters) - China's central bank said on Friday it is fully able to cope with external uncertainties, as it has "rich" policy tools and ample policy room to manoeuvre.

The comments came just hours after the United States raised tariffs, which threaten to increase pressure on the Chinese economy.

Analysts say the central bank will likely have to step up support for the economy as trade tensions with the United States escalate.

U.S. President Donald Trump's tariff increase to 25% on $200 billion of Chinese goods took effect midday on Friday, and Beijing said it would strike back.

"Facing internal and external economic changes, our country's monetary policy has ample room (to respond) and our money policy toolkit is rich," Sun Guofeng, head of monetary policy department of the People's Bank of China (PBOC), told reporters in Beijing.

"We are fully able to cope with various internal and external uncertainties."

The senior PBOC official pledged to keep liquidity reasonably ample while sticking to a "prudent" monetary policy that's neither too loose nor too tight. He added that he expected money supply and credit growth to remain steady.

Sun said the PBOC will "better use" structural policy tools including its targeted medium-term lending facility (TMLF), relending and rediscount to support private and small firms, without elaborating.

At the same time, it will use policy tools to conduct open market operations in a flexible way and guide money market rates within a "reasonable" range, the official said.

PBOC data on Thursday showed Chinese banks throttled back new lending in April after a record first quarter that sparked fears of more bad loans, suggesting the central bank was fine-tuning policy in light of recent encouraging data and concerns about a rapid rise in debt.

Other data on Thursday also showed price pressures in China were rising.

On Monday, just hours after Trump said he intended to increase tariffs on Chinese goods, the PBOC announced a cut in reserve requirement ratios (RRR) for some small and medium-sized banks.

(Reporting by Kevin Yao; Writing by Yawen Chen; Editing by Richard Borsuk)