China needs an “urgent” tightening of monetary policy to prevent the huge stimulus measures introduced this year from inflating stock and property bubbles, one of the country’s leading bankers has warned, reported the Financial Times.

Qin Xiao – chairman of China Merchants Bank, the country’s sixth-biggest – says that the government should not be afraid of a “moderate slowdown” in the economy.

“It is urgent that China shifts from a loose monetary policy stance to a neutral one,” he writes.

According to calculations by the Financial Times and independent economists, China’s stimulus measures could amount to 15-17 per cent of GDP this year if government-induced bank lending is taken into account – by far the largest among major economies.

The State Council, China’s cabinet, gave its first clear hint Wednesday evening that it was considering a tighter monetary policy when it said that policy should focus both on managing inflationary expectations as well as securing stable growth – the first time it has mentioned inflation since the global economic crisis hit China last year.