The policy makers of China's central bank said at their third quarterly meeting that the country should carry out "moderately tightening" monetary policies to further rein in credit growth.
They said the central bank should coordinate the adjustments of interest rates and exchange rates and step up controls over the liquidity within the nation's banking system to maintain "rational" growth of lending.
The policy makers suggested a close watch on the potential impact of the U.S. subprime crisis to the Chinese financial market despite the nation's economy being "generally stable".
Increasing inflationary risks and rising assets prices have added to the problems of excess investment growth and widening trade surplus, they said.
The central bank should carry out studies on the problems to find a solution and "improve the quality of China's economic growth", said the policy makers.
China's commercial banks are entering a high risk period for increasing housing mortgage loans, according to a report released by the China Construction Bank (CCB), the country's second largest commercial lender.
The banks could face a rapid rise in mortgage delinquency rates because of the frequent lending rate hikes and cheating in housing mortgage loans, the report stated.
China has raised the benchmark one-year lending rate five times this year amid efforts to curb investment growth and cool the overheated economy.
Meanwhile, some mortgage recipients had cheated on their applications and invested their funds in the stock markets, which had more than doubled in value since the beginning of the year. Analysts believe a drop in the markets could result in more bad loans.
China's central bank vice governor Wu Xiaoling warned commercial banks not to sacrifice credit control for high profits earlier this month
Statistics show new loans totaling 3.08 trillion yuan (409.6 billion U.S. dollars) were approved in the first eight months this year, and the figure is close to the total loans of 3.18 trillion yuan (422.9 billion U.S. dollars) for 2006.