(Yicai Global) Feb. 21 - China will continue with the prudent monetary policies and will never adopt indiscriminate strong economic stimulus, said Chinese Premier Li Keqiang during a plenary meeting of the State Council today.

In January 2019, the People's Bank of China lowered the reserve requirement ratio (RRR) for financial institutions twice, totaled one percentage point, which led to outside suspicions of quantitative easing in the Chinese economy.

Li pointed out that lowering the RRR for financial institutions twice last month was a reaction to the demands of mainstream market players.

Besides, China has a higher RRR than any other economy in the world, so it has enough space to adjusting the RRR lower. Li also pointed out that while lowering RRR, the government also took measures to soak up liquidity.

Li also emphasized that the new loans in the market need to be put into good use.

After lowering the RRR, the total of social financing seems to be increasing in a large scale, but most financings are short-term loans and bill financing, which could lead to interest arbitrage and new potential economic risks, based on Li's speech.

"The financial institutions need to ensure more loans are flowing into the real economy and medium-, small-, micro-companies and increasing the issuance of medium to long-term loans to lead the macroeconomy towards smooth growth," Li said.

The relevant departments need to study the real economy and the changes in medium-, small- and micro-company demands for loans, and offer targeted measures accordingly, Li reiterated.