The central bank's Shanghai headquarters yesterday issued a report warning investors to prevent market risks caused by changing expectations, National Business Daily reports.

The report on Shanghai's financial stability for 2007 points out that excessive liquidity is a concrete manifestation of China's economic imbalance, and that the price of equities showed a marked increase in 2006.

The report also suggests the government should pay attention to the foreign capital flowing into China's real estate market.

Shanghai is also exploring ways to integrate its financial institutions and stepping up the development of financial holding companies, according to the report.

By the end of 2006, foreign banks had opened 100 operational outlets in Shanghai, an increase of 18 from 2005. Overseas banks also had 106 representative offices Shanghai by the end of 2006, an increase of six from 2005.