China's central bank said that it will use tools to safeguard stability in money markets and that tight liquidity is set to ease, giving the first official signs of relief for a cash squeeze in the world's second-largest economy.

The People's Bank of China (PBOC) has provided liquidity to some financial institutions to stabilize money-market rates and will use short-term liquidity operations and standing lending-facility tools to ensure steady markets, according to a statement posted to its website yesterday. It also called on commercial banks to improve their liquidity management.

The statement is the first public confirmation of central bank action to ease a crunch that sent China's overnight repurchase rate to a record last week and came hours after Ling Tao, deputy head of the PBOC's Shanghai branch, said liquidity risks were controllable. Premier Li Keqiang is seeking to wring speculative lending out of the nation's banking system after credit expansion outpaced economic growth.