As a result, households are unwilling to increase spending and in the end, the real economy fails to rebound, if inflationary pressure builds up alongside asset price increases, central banks may consider exiting the market and raise interest rates, the authority's head said.
When economic performance, inflation or monetary policy falls short of market expectation, asset prices might drop sharply and remain volatile, he added.
Chan said he was certain that since the outlook for macro economic and financial environment is very uncertain, it is highly possible that large fund inflows and outflows as well as sharp fluctuations in the financial markets will continue to be seen.
"We should all take precautionary measures and get to the bottom of the problem, learn from others' experiences and avoid overstretching ourselves. Otherwise, we may find ourselves being trapped in the debt abyss with no way out," he said.
Cumquat market in S China's Guangxi
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