A Chinese political advisor on Saturday warned a continued over-expectation for the appreciation of the Chinese currency yuan would bring in more inflows of hot money and worsen the already excessive liquidity.

The yuan's rising exchange rate against the greenback has attracted international surplus capital to flood the Chinese market via various legal or illegal channels, said Li Deshui, former director of the National Bureau of Statistics (NBS).

Li, who made this remark at a plenary meeting of the First Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC), said effective monitoring of capital flows shall be at the core of the government's macro-control work.

The subprime crisis has dragged the US economy down to a recession mire, featuring shrinking consumption and retarded economic growth, Li said.

Meanwhile, China has kept raising the interest rates, while the United States has so far seen five cuts, Li said, adding domestic interest rate hikes and growing expectations for the yuan appreciation will make the investment in Chinese currency, stock markets and real estate "a rarely secure haven from risks".

"More international speculative funds will pour in through various channels," Li said.

China has now an accumulation of about US$500 billion of hot money, according the analysis of relevant research institutes, he said.

Hot money, if not blocked effectively further, will aggravate the imbalance between China's internal revenues and expenditure, worsen the already excessive liquidity, add more uncertain factors to Chinese capital market, overheat the economy, intensify the inflation pressure and may even trigger a financial crisis, he warned.