This undated photo shows the headquarters of the People's Bank of China in Beijing. (PHOTO / XINHUA)

BEIJING - China still has sufficient policy space to deal with greater-than-expected challenges and changes, a senior official of the People's Bank of China, the country's central bank, said Wednesday.

The central bank will continue to implement a prudent monetary policy in a targeted way and strengthen counter-cyclical adjustments and policy reserves, PBOC official Zou Lan told a press conference.

The central bank will use a combination of policy tools to keep liquidity at a reasonable and sufficient level, and guide financing costs of the real economy downward, Zou said.

PBOC official Zou Lan reaffirmed that the central bank will resolutely correct one-sided and pro-cyclical behaviors and deal with actions that disrupt forex market orders

He added that efforts will also be directed toward guarding against the risk of exchange rate overshooting and guiding financial institutions to help defuse local government debt risks.

ALSO READ: PBOC cuts bank reserve ratio again to aid recovery

Speaking about the yuan's exchange rate, Zou said though the yuan depreciated against the US dollar following a higher dollar index since mid-July, the Chinese currency has maintained its strength against other non-dollar currencies.

Zou reaffirmed that the central bank will resolutely correct one-sided and pro-cyclical behaviors and deal with actions that disrupt forex market orders.

READ MORE: China's central bank to enhance data security

As China's economic recovery continues apace, there is a solid foundation for the yuan exchange rate to maintain its basic stability at a reasonable and balanced level, the central bank official said. 

Also on Wednesday, China's one-year loan prime rate, a market-based benchmark lending rate, came in at 3.45 percent, unchanged from the previous month, according to the National Interbank Funding Center.

The over-five-year LPR, on which many lenders base their mortgage rates, also remained unchanged from the previous reading of 4.2 percent.

The monthly data is a pricing reference rate for banks, based on rates of the central bank's open market operations, especially the medium-term lending facility rate.