Liquidity crunch to plague China?

Therefore, the financial market seems booming, but the economic growth is moderate, according to Zuo Xiaolei.

The recent soaring inter-bank interest rates were pushed up by easing capital inflows due to tight regulatory oversight, instead of real demand from the economy, Zuo said.

According to Wednesday's State Council meeting chaired by Premier Li Keqiang, China will continue a prudent monetary policy while keeping a reasonable scale of monetary supply.

Zeng Gang, a banking expert with the Chinese Academy of Social Sciences, said the key to addressing problems with China's financial sector lies outside the sector as banking is just a supporting for the economy.

Reforms should be taken in the real economy to unleash new growth points to direct the movement of money supply, said Zeng. In this way, the financial risks will gradually be tackled.