China's central bank is sending mixed messages on where monetary policy is heading, and that is pushing investors to the sidelines.

With markets confused by the actions of the People's Bank of China, renewed calls for better communication have emerged just as other major central banks, such as the Federal Reserve and the Bank of Japan, are becoming more open.

"The market is directionless now because the key factors, including monetary policy, are a bit unclear. We are all watching and dare not make any drastic moves," said Wang Jing, deputy general manager of the fixed-income department at Jinyuan Securities.

Deciphering the signals isn't straightforward.

One important indication is that the central bank is allowing a large amount of cash to slosh around the banking system, a situation that may spur inflation because it makes borrowing cheap. A benchmark for interbank borrowing costs, the so-called seven-day repurchase agreement rate, has dropped to 3.24% from 4.58% at the end of last year.

The money has built up because of a surge in inflows of foreign cash that also has pushed the yuan to a record high this week. While China keeps tight control on flows of capital in and out of the economy, short-term speculative investments oftentake place under the radar, and the central bank typically soaks up extra cash by using so-called liquidity operations.

But recent comments from top officials suggest the bank wants to clamp down hard on rising prices and is adopting a more hawkish tone. China's central bank Gov. Zhou Xiaochuan said last month that he is on guard against inflation and that monetary policy is now "neutral," after a slightly easy policy stance in the past year. Consumer prices jumped 3.2% year on year in February, picking up from a 2% rise in January and marking the biggest increase since April. All this has left investors unwilling to make heavy bets one way or the other. The yield on the benchmark seven-year government bond has barely budged in the past month, trading between 3.42% and 3.47%, while the usually volatile equity markets have been calmer than usual. The Shanghai Composite Index has traded between 2220.08 and 2369.65 since March 1.

"The range trading seen in both the stock and bond markets recently shows that investors don't have any clear expectations for the central bank's future monetary-policy direction," said Yang Delong, a fund manager at China Southern Fund Co. , which managed 227.1 billion yuan ($36.6 billion) in assets as of the end of 2012. Overall, analysts say that although the signals are difficult to read, the central bank appears to be keeping policy on hold as it weighs how the economy is performing.

"There's been an increase in hot-money inflows, but the PBOC may find it difficult to let the yuan rise too fast or tighten monetary conditions too dramatically because the economic recovery remains slower than expected," said Zhu Chaoping, head of research at ChinaScope Financial, a research and data firm partly owned by Moody's Corp.

As China works to make its capital markets more modern and efficient, a system that allows investors to better understand the central bank's policy leanings is becoming more critical. Such a mechanism would let policy makers affect markets faster and more directly. Developments in China's markets are increasingly rippling across the globe as the economy grows and markets operate more freely.

At the moment, the PBOC issues long quarterly reports on monetary policy, often couched in general terms, but its efforts to communicate are far more sparse than at other central banks.

Analysts say one cause of the PBOC's customary reticence is that it still takes orders from above and isn't independent like its Western peers. Important decisions on currency and interest-rate moves are made by the Communist Party elite and the country's Cabinet, the State Council.

"This constrains the PBOC's ability to express itself more effectively," said Qinwei Wang, China economist at London-based research firm Capital Economics. "From the investors' point of view, there's indeed a need for the PBOC to become more transparent as it will definitely help with expectation guidance."

—Ina Zhou, Amy Li and Zeyuan Wei contributed to this article.

Write to Shen Hong at