"[We] intend to diligently implement active fiscal policy and appropriately loose monetary policy and expand support to the financial sector to promote stable, rapid economic growth," the State Council said in a statement.

The mainland aims to increase its money supply by 17 percent next year to increase domestic consumption.

The new target for growth in the broad M2 measure of money supply marks a substantial increase from the 15 percent pace in the year to October. The Cabinet also showed support for yuan business in Hong Kong, saying Beijing targets expanding the scale of yuan settlements in the SAR to lower exchange-rate risk from external markets.

It will allow Hong Kong enterprises and financial institutions to issue yuan- denominated bonds in Hong Kong.

Beijing will also increase policy bank loans over the 2008 level of 100 billion yuan (HK$113.2 billion) and aim to increase total lending by financial institutions by 4 trillion yuan, the Cabinet said.

The People's Bank of China will stop issuing three-year bills and reduce its issuance of one-year and three-month paper to provide more liquidity in the financial system.

The State Council called on banks to give more credit to companies with sound fundamentals and to offer refinancing to such businesses if they hit short-term cash flow problems.

The government is widening fund raising, starting with the development of real estate investment trusts.

"Banks must do a good job of balancing their roles in boosting economic growth with that of guarding themselves against risks," the State Council said. "They should not be blindly reluctant to lend during an economic downturn."

China will "increase flexibility" for lowering lending rates and also increase foreign exchange rate flexibility as it aims to maintain a "stable, balanced" yuan exchange rate.

The 30-point State Council directive, under which most policies will have to be followed up with specific implementation rules, comes on the heels of the 4 trillion yuan stimulus package announced last month and repeated interest-rate cuts.

"Policy at the moment is generally being focused on boosting liquidity in the banking sector and making sure that [money] is lent to fund investment in infrastructure projects," said Glenn Maguire, chief Asia-Pacific economist at Societe Generale.