BEIJING - CHINA'S banking watchdog ordered financial institutions on Thursday to tighten supervision of credit in the face of the global economic turmoil, state media reported.

The China Banking Regulatory Commission issued new instructions designed to stem the flow of funds into the stock and property markets, the Xinhua news agency said.

The commission ordered banks and other financial players to strengthen credit management and make sure staff did not embezzle funds for investment in the stock market, according to Xinhua.

It urged supervision of funds flowing into the property market, ensuring they would not be spent on speculative activities, the agency said.

It also urged commercial banks to make better preparations for possible losses, asking them to increase provisions, Xinhua said, without giving a detailed figure.

Commercial banks should report back on a monthly basis on their efforts to tighten credit management, the commission said.

Despite the instructions, the commission insisted China's banking industry was operating steadily and that the risk from the US subprime crisis behind global financial woes was under control.

Chinese officials have expressed confidence that the nation's finance system is equipped to withstand the global financial crisis.

They have pointed out that China has spent the past couple of years introducing a series of measures to prevent the build-up of a real estate bubble. -- AFP