THE U.S. subprime crisis stands as a clear warning to China as it presses on with financial market reforms, China’s central bank said Thursday.

The People’s Bank of China, in the summary of its 2007 China Financial Market Development Report, also warned that the fallout from the global credit contraction could still buffet the domestic economy.

The supbrime woes had gathered steam under conditions of excessive liquidity, flimsy market controls and weak risk management, the central bank said.

“This is a very good warning for the speeding up of our country’s financial markets development,” it wrote.

Shen Bingxi, a central bank vice director, said China would move ahead with plans to introduce new financial derivative products while tightening its regulation of the industry to counter subprime-type risks.

The central bank said global markets had yet to regain their confidence despite bold measures by Western central banks to inject liquidity and prop up battered financial institutions.

“The unclear future of the subprime crisis will have a certain impact on China’s financial markets,” the report said.

It said lingering supbrime troubles would weigh on the world economy in 2008 and that the resulting slowdown would further narrow China’s trade surplus. (SD-Agencies)