"We should also learn from the lesson during the post-crisis period in 2008. Back then, as part of the anti-crisis efforts, lots of currencies were injected into the market, a major causality for the inflation in 2010 and 2011," said Xie.

 However, a report from Huatai Securities said the central bank will continue relaxing the monetary policy, in line with the Central Government's call for sustained growth. Dwindling orders from Europe and other trade partners have sapped China's exports, and the decline of the yuan's counterparts in foreign exchange reserves will force the central bank to further cut the reserve requirement ratio, the amount of funds that commercial banks must keep in reserve.

 In the first half of 2012, the reserve requirement ratio was cut twice, down 0.5 percentage point on February 24 and May 18 respectively, to add to liquidity. It's highly possible that the central bank will further lower the ratio, said a report from Huatai Securities.

No major changes

China's monetary policy is facing complications, in which it has to sustain growth, prevent inflation and support the country's structural adjustment.

 In light of this, the central bank pointed out that it would continue a prudent monetary policy by making it more forward-looking, targeted and effective. The ultimate goal is to create a stable yet moderate financial atmosphere for China's structural adjustment, said the central bank.

 That is to say, China's monetary policy won't see major adjustments in the upcoming several months. Even if adjustments are necessary, the central bank will take a very cautious approach to them.

 China has a high-level interest rate and reserve requirement ratio, which creates room for making cuts. But interest rate adjustments should depend on three elements: economic growth, inflation and interest rate differences between China and other countries. The adjustment of the reserve requirement ratio mainly depends on the liquidity of currencies, but the yuan counterparts of foreign reserves are still uncertain in the second half of 2012.

 There are five highlights for the monetary policy in the next few months, according to the central bank report released on August 2.

 First, the amount of credit will be increased to maintain a reasonable level of social financing. The central bank will guide financial institutions to support the real economy in a more targeted and forward-looking way.

 Second, efforts will be intensified in structural adjustment, as in supporting labor-intensive and strategic emerging industries like environment protection, media, modern service and high-end manufacturing, and restricting lending to industries with high energy consumption, pollution and overcapacity. The Central Government will also prohibit bank loans to speculative activities in the property sector.

 Third, the central bank will push market-based reform of interest rates and the reform of renminbi's exchange rate formation mechanism. It will expand renminbi settlement in cross-border trade and investment and widen channels for its outflow and inflow.

 Fourth, the central bank calls for carrying forward financial reforms and pledges to give financial support to the reform of local institutions.

 Finally, authorities at all levels should maintain a stable financial system and avoid system-wide risks. The central bank will urge all financial institutions to strengthen internal control and their risk-control systems. It will also intensify supervision over local governments' financing platforms, financial institutions' off-balance-sheet activities and financial risks of the property market. Right now, loans of local governments' financing platforms are a main source of risks for financial institutions.

 China's monetary policy in the coming months will be more prudent. Without system-wide financial risks, the main direction won't be altered, according to a report by GF Securities.