China's central bank governor says the country will continue with its "prudent" monetary policy and fine-tune it to cope with economic conditions, even as drops in industrial profit levels accelerated in May.

Speaking on Friday to the annual Lujiazui Forum in Shanghai, a three-day gathering of the country's top financial officials and executives, Zhou Xiaochuan, governor of the People's Bank of China, also said China would step up efforts to reform its financial markets as well as its interest rates and the yuan's exchange rate.

"The country will continue adopting prudent monetary policies, though timely and measurable fine-tuning will be made," he told delegates at the forum at which officials and executives are meeting to discuss financial reforms.

Zhou's comments came as many economists now expect growth to slow further in the second quarter after hitting a three-year low of 8.1 percent in the first quarter, and are waiting for the central bank to further loosen monetary policies, as China's economic conditions fail to kick-start a recovery.

But growth estimates vary.

On Thursday, Bank of China Ltd's Institute of International Finance forecast China's economic growth will fall to 7.6 percent in the second quarter, before rebounding to 8.2 percent three months later.

Officials from China International Capital Corporation, the nation's biggest investment bank, have suggested that April-June growth could drop to as low as 7.3 percent, 0.2 percentage points lower than the 7.5 percent growth target that Premier Wen Jiabao set in March.

Corporate profits also point to continued economic slowdown.

The Lujiazui Forum started as the National Bureau of Statistics said on Friday that combined profits at the country's major industrial enterprises were 390.9 billion yuan ($61.5 billion) in May, down by 5.3 percent year-on-year, and accelerating from a decline of 2.2 percent in April.

In the first five months of the year, industrial profit also dropped 2.4 percent year-on-year to 1.843 trillion yuan.

This week, the People's Bank of China is expected to inject a total of 197 billion yuan into the banking system through reserve repurchases.

The move comes after money market rates soared in June, when the overnight and seven-day Shanghai Interbank Offered Rate, or Shibor, which indicates banking liquidity, increased by about 1.5 percent.

Reserve repurchase by a central bank is widely seen as a precursor for reserve requirement cuts at lenders.

Qu Hongbin, a China-focused economist at HSBC Holdings Plc, said in a research note that the amount of money lenders are required to hold against their lowers will be dropped by 200 basis points, or 2 percent, in the second half of the year.

The reserve requirement ratio has been cut three times since November. Last month, the central bank cut benchmark interest rates for loans and deposits, the first time since 2008.

Also at the forum, Hu Xiaolian, the central bank's vice-governor, cautioned delegates of systemic risks involved with the yuan's use in international trade and investment.

She said that the central bank will set up a system to identify and monitor such risks and use market-based tools to manage them.

Moves on the yuan's internationalization continued after an official said on Thursday in Hong Kong that China will allow free yuan conversion in a trial in a special financial zone to be jointly developed by Hong Kong and neighboring Shenzhen.

New measures will be adopted to promote Hong Kong as an offshore yuan center during President Hu Jintao's visit to the special administrative region over the weekend.

Contact with gaochangxin@chinadaily.com.cn