China's central bank official warns of rising financial risks

China has developed a multi-layer financial system with more diversity and sophistication, but new business models bring about rising risks, a senior central bank official warned Sunday.

In addition to the multi-layer financial market, China's product portfolio has become more sophisticated, deputy governor of the People's Bank of China Chen Yulu told a financial forum.

However, financial institutions are exposed to higher risks, as private lending and Internet finance have become more intertwined, and stock, bond and foreign exchange markets have become mutually contagious, he warned.

"The existing supervision framework is not compatible with the problems in the financial sector," he said.

He reaffirmed the need for financial institutions to improve support for the real economy and use their funds in a more efficient way. Regulators should keep a close eye on systematic risks and introduce macro-prudent oversight when necessary.

The central government vowed strict measures against illegal fundraising early this year to fend off systemic risks, prompted by the discovery of Ponzi schemes in online peer-to-peer (P2P) lending platforms.

Chen also warned that while the growth in money supply and leverage ratio have outpaced that of gross domestic output (GDP), there are mounting calls for monetary policy easing.

Meanwhile, such sectors as agriculture, as well as small and high-tech companies, are still short of funds, he added. Endi