SHANGHAI - China needs innovation in its monetary policy tools as the market has become immune to the standard moves taken by the central bank to curb excess credit, a senior banking regulator said in remarks published on Friday.

The world's second-largest economy needs to press ahead with interest rate market reforms and use more fiscal policy tools, Yan Qingmin, assistant chairman of the China Banking Regulatory Commission (CBRC), was quoted as saying by the China Securities Journal.

China raised interest rates for the third time this year effective Thursday, and has also lifted banks' required reserve rates six times so far this year to tame stubbornly high inflation, which hit a 34-month high of 5.5 percent in May.

Yan suggested China should take cues from other countries that have imposed foreign investment taxes, financial transaction taxes or unremunerated required ratios on foreign capital to control the inflow and outflow of such funds.

Yan also warned that loans via local government financial vehicles should not be used to fund new projects, except for low-cost housing construction.

His comments echo those of CBRC Chairman Liu Mingkang in May and could signal that Beijing may be considering imposing taxes on foreign capital to stem the flow of hot money.

The banking regulator has already requested commercial banks to conduct stress tests.