CHINA'S prudent monetary stance won't rock the stock market even if an interest rate increase may be on the way, and there is enough room for China to use all kinds of policy tools to mop up excessive liquidity, senior officials said.

"A possible rise in China's interest rate will affect stock prices only for two or three days," said Xia Bin, an adviser to China's central bank, was quoted by the China Securities Journal. "Share investors should realize that interest rate increase only has a short-term impact."

Shanghai's key stock index has kept falling these days as worries about higher interest rates intensified. Today, the benchmark Shanghai Composite Index dropped 1.32 percent, the most since November 30 and led by banks, after retreating 1 percent yesterday.

China is scheduled to release its November's economic data on this coming Saturday. A new record-breaking Consumer Price Index, the main gauge of inflation, is widely expected and triggers speculation for an imminent interest rate increase.

Meanwhile, Wu Xiaoling, a member of the Standing Committee of the National People's Congress, China's top legislature, and vice chairman of its Financial and Economic Committee, said China's central bank needs to further raise reserve requirements and issue more bills next year to reduce excessive liquidity.

She said China must beef up efforts to shield economy from speculative money inflows, especially after the United States announced to further ease its monetary policy.