BEIJING, July 2 (Xinhuanet) -- Concerns were raised recently over the liquidity crunch in China's financial system and subdued strength.

As the Shanghai Inter-bank Offered Rate (SHIBOR) overnight rate, a basic gauge of inter-bank borrowing costs, surged to an all-time high of 13.44 percent on June 20, a pessimistic mood lingered over the market.

On June 24, the "black Monday" shocked China's stock market as China's key stock index recorded the biggest daily loss in nearly four years. The benchmark Shanghai Composite Index tumbled 5.3 percent to end at 1,963.24, the lowest point in nearly seven months, while the Shenzhen Component Index plummeted 6.73 percent to 7,588.52.

More worries came to the possible chain reactions to the bond market, property market and even the whole banking system of China.

However, China's financial regulator took the moderate measure than adjusting deposit reserve ratio immediately.

China Banking Regulatory Commission(CBRC) Chairman Shang Fulin said on Saturday the recent cash crunch would not affect the stable operation of Chinese banks.

Experts said that a lower ratio is not necessary as the current monetary supply is ample enough to support the real economy.

Zuo Xiaolei, chief economist at China Galaxy Securities, said the problem with the Chinese financial market is that much of the funding stayed "circulating" in the financial system instead of being translated into real economic growth.

China keeps pushing forward reform and regulation on its financial system to maintain the financial stability and ensure long-term stable and healthy economic development, said Shi Jianxun, a professor of Tongji University in Shanghai.

However as an important part of reform, the liquidity and risk management still need to be improved, Shang Fulin acknowledged on Saturday.

He said the authorities would continue regulating local government financing vehicles (LGFVs), and work out plans to standardize it.

CBRC will also strengthen regulation over commercial bank-issued wealth management products (WMPs).

He urged commercial banks to enhance oversight of their WMPs and improve transparency of WMPs sales.

It is considered a good opportunity for China to urge the banks to drop the high-risk business models, by which, financial risks will gradually be tackled, Shi Jianxun noted.