A top central bank official has said China will tweak monetary policy by funding sectors in need, such as small enterprises and low-cost housing, an official newspaper reported Tuesday.

Hu Xiaolian, Vice Governor of the People's Bank of China, said the government should adjust money policy "at an appropriate time", the Financial News -- which is backed by the central bank -- reported.

China should maintain "stable" monetary policy and credit, but more funds should be directed to cash-strapped small enterprises, rural areas and the government's push to build more low-cost housing, she said.

Her remarks are similar to a statement made by the central bank earlier this month, which raised hopes of a relaxation of tight credit as growth in the world's second largest economy slows.

Hu said that surging prices had been brought under "preliminary" control but other domestic and external factors posed challenges for economic growth.

"Europe's sovereign debt crisis is continuously escalating... this is bringing new uncertainties and challenges," she said.

Europe is a key export market for China, so turmoil in the region could threaten the country's economic growth.

China, anxious about high inflation, has pulled on a variety of levers to curb price rises in the past year, including restricting the amount of money banks can lend and hiking interest rates.

But the nation's inflation slowed sharply in October with the consumer price index rising 5.5 percent year-on-year, marking the slowest pace since May as food prices fell.

Following calls to fine-tune monetary policy, analysts say the government is likely to reduce the reserve requirement ratio -- funds banks must set aside as reserves -- in coming months.

But most rule out a change in interest rates, which is seen as a more aggressive policy tool.