China's booming stock market is overheating and many investors will lose their money after getting caught up in the speculative frenzy, a top Chinese official has warned.

"There is a bubble going on. Investors should be concerned about the risks," Cheng Siwei, vice-chairman of the National People's Congress, China's parliament, told the Financial Times in an interview published Wednesday.

"But in a bull market, people will invest relatively irrationally. Every investor thinks they can win. But many will end up losing. But that is their risk and their choice."

The remarks were the most direct admission by a Chinese official that the stock market has run well ahead of itself and could be in for a major correction.

Gains from January last year to date are about 160 percent in what is a remarkable but increasingly dangerous reverse from 18 months ago when prices floundered at eight-year lows.

"You can't take administrative measures to change people's behaviour. The market is based on people's behaviour. Investors will have to learn their own lessons," Cheng told the newspaper at a business summit in Dubai.

Cheng's comments came as a banking regulatory official said commercial lenders would be ordered to recall property loans suspected of being used to speculate in shares, a small first step toward cooling the bourse.

The report by the official China Securities News on Tuesday said that some people were taking on the highly risky strategy of redirecting housing loans into the stock market.

Recent comments by other government agencies have pointed to the unease at both the high growth rate and heavy volumes seen on China's two exchanges.

The State-owned Assets Supervision and Administration Commission, which overseas state companies, has said a collapse in the stock market would hurt both companies and the public.

It has warned state-owned companies not to speculate on the stock market, the newspaper said.