“I saw the figures for last month and M1 is still very high, increasing 31pc from last year, which is one per cent higher than last month,” he said in an interview with The Daily Telegraph.

“We are seeing a lot of money coming to China which is creating a current and capital account surpluses.”

China’s regulators have introduced a raft of measures in recent weeks in an attempt to cool down the economy, forcing banks to raise the capital adequacy ratios and hitting second home buyers with regulation designed to drive speculators out of the property market.

However, Mr Guo warned that the effectiveness of measures to cool house prices, which have risen by up to 40pc this year in some major cities, could be blunted by the massive reserves of cash still being held by private developers. “Sales are falling but prices are not,” he said. “Developers have a lot of cash, so they’re not too concerned at the moment.”

“Property prices are definitely seeing something of a bubble, but it differs from city to city. You can see prices going very high on the coastline, but in the inland areas and western areas, even in provincial capitals, it’s still not so high.”

China has moved quickly to apply the brakes after first quarter figures showed the economy expanding at 11.6pc year-on-year, driving down sentiments on the country’s benchmark Shanghai index, which has fallen 27 per cent this year.

However, while loan growth is slowing from 2009, huge amounts of fresh loans continues to pour into the Chinese economy with the total outstanding loans still growing at a rate of 18pc this year.

After issuing 10 trillion yuan (£1 trillion) of new loans in 2009, Chinese banks are targeted to inject another 7.5 trillion yuan this year, a reduction but still nearly twice the 4.6 trillion yuan of the loans disbursed in 2008.

Mr Guo warned that the continuing splurge in lending also raises the risk of a sharp rise in non-performing loans among smaller Chinese banks that have funded local government infrastructure projects, often of dubious viability.

“I think that small banks last year newly issued loans grew even fast, some even doubled their liability and assets,” Mr Guo said.

“At the moment the banks seem healthy but I think that small banks, because we don’t know the structure of their assets, maybe have got more risk exposures because they are growing too fast and their risk management is not as good as big banks.

“And secondly because they are very small and their loans are going to a more concentrated number of customers, that also could definitely cause a problem.”

Mr Guo added that with such massive stimulus Chinese inflation, currently running at 2.8pc, was at growing risk of rising. Almost all the coastal provinces that make up China’s manufacturing heartland had granted wage increases averaging 20pc this year.

Analysts add there is an increasing anecdotal evidence to suggest that China’s official inflation figures do not reflect the true pace of price rises being felt by people on the ground. The price of some foodstuffs is up 20pc this year.

Tom Miller of the Dragonomics consultancy in Beijing said: “The Chinese government recently mooted that food subsidies be handed out to rural low-income families, which is a sure indication of the government’s true concerns on inflation.

“The last time the government took that kind of measure was in April 2008 when consumer price inflation hit 8pc for three months running, which suggests the government knows that real inflation is higher than the official numbers suggest.”

The growing inflationary strain has increased pressure in the country for a rise in interest rates, a tool that China’s central bankers have been reluctant to use for fear of damaging exporter competitiveness and piling more burdens on the loan bills of already over-stretched provincial governments.

However, Lu Feng, professor of economics at Beijing University, said that time was running out for China’s monetary authorities to act.

“Although the Chinese government’s efforts to control inflation are impressive, the prospects for fighting this inflation without effectively addressing the problems of loose money are not very encouraging,” he wrote this week on Forbes.com.