"The things that are worrying the central bank are asset prices and the potential for bubbles, and the inflationary consequences of asset price inflation," said Stephen Green, an economist at Standard Chartered Bank.

The Shanghai Composite Index has already surged 102.6 percent since the beginning of this year, and the average price-earnings ratio of A shares is as high as 43 times, a jump of 44 percent from the start of the year, according to TX Investment Consulting Co ltd.

Shang Fulin, chairman of the China Securities Regulatory Commission, recently cited stock market "abnormalities" to illustrate the "accumulated" risk that has long been ignored by investors.

The government has taken many financial measures to mop up liquidity this year, including issuing 150 billion yuan worth of treasury bonds, speeding up the return of red chips to the mainland, and a pilot scheme to allow mainlanders to invest in the Hong Kong market.

We are waiting for the 17th National Congress of the Communist Party of China to see what the government will do to fight inflation, and the stock market may respond to that," said Zhu.