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Financial markets in Europe and America are "out of sync with the real economy" and any future correction in "foreign financial asset bubbles" could impact China, according to Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission. When asked by reporters which nation has the biggest bubble risk, Guo declined to point to a specific country but said the U.S. market is the largest in scale.

While proactive policies are necessary to stabilize the economy, financial markets should ultimately reflect the conditions of the real economy, he noted.

By contrast, Guo said, China's economy is recovering and its asset prices are "very attractive," with foreign capital flowing in -- albeit at a manageable pace. Beijing will continue to encourage cross-border capital flows, although they should not be too large as to disrupt local markets.

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