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China central bank chief says making monetary policy neutral will help supply-side reforms

BEIJING (Reuters) - Making monetary policy neutral will help China's supply-side reforms, the head of the central bank said on Friday.

China's monetary policy is prudent and neutral and the central bank has many tools at its disposal, Zhou Xiaochuan, governor of the People's Bank of China (PBOC) said at a news conference on the sidelines of the annual parliament session in Beijing.

Zhou also said that China will not deliberately seek to include its bond market in global indexes.

Pan Gongsheng, another vice governor who is also head of the foreign exchange regulator SAFE, told the same briefing that China had large potential to open up its bond market to foreign investors.

China will improve its bond market system to help attract foreign investment, Pan added.

China is trying to encourage more investment to offset pressure from capital outflows, which are weighing on the yuan currency and its foreign exchange reserves.

(Reporting by Kevin Yao and Yawen Chen; Editing by Kim Coghill)