FILE PHOTO: Pan Gongsheng, vice governor of the People’s Bank of China (PBOC), attends a news conference during the ongoing session of the National People’s Congress (NPC) in Beijing, China March 10, 2019. REUTERS/Jason Lee

BEIJING (Reuters) -China will maintain prudent monetary policy and not resort to flood-like stimulus, said Pan Gongsheng, vice governor of the People’s Bank of China (PBOC).

But he also told a news conference on Tuesday that the space for monetary policy is still relatively big.

Signs that China’s economy is losing steam and small firms are struggling have stoked market expectations of policy support sooner rather than later. The PBOC last delivered a cut to banks’ reserve requirement ratio (RRR) in mid-July.

Speaking at the same event, Sun Guofeng, head of the monetary policy department at the PBOC, said there is no big shortfall of base money, and liquidity supply and demand will remain basically balanced in coming months.

“With a most likely worsening slowdown in coming months, we believe the PBOC is unlikely to hold a hawkish stance,” Nomura wrote in a research note on Wednesday.

“However, based on the tone and messages from (the) press conference, we lower the probability of a targeted RRR cut in September-October to 50% from 70% previously,” Nomura said, adding that the PBOC could opt for more targeted tools to support groups such as SMEs instead.

Customs data released on Tuesday showed Chinese exports unexpectedly grew at a faster pace in August thanks to solid global demand, helping to take some of the pressure off the world’s No.2 economy.

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