The unusual decision to keep Zhou on came because policymakers had expressed "deep concerns" about a surge in credit since the global financial crisis nearly five years ago.

The total outstanding credit on the books of China's central bank has reached more than 180 per cent of the country's gross domestic product, fuelling worries about asset bubbles or over investment, people familiar with the government's thinking told the .

Much of the momentum towards growth on the mainland is based on credit expansion since 2008, when the country began rolling out a 4 trillion yuan (HK$4.93 trillion) stimulus package, according to people working for a large state-owned bank in Beijing. They added that many economic or financial crises in the past had been linked to explosive credit expansion.

That's why Zhou, with his vast experience, will be asked to defy convention by staying on beyond the retirement age of 65, despite the fact he was left out of the Communist Party's top leadership in last year's reshuffle.

Sources said Zhou would probably be appointed a vice-chairman of the Chinese People's Political Consultative Conference at its meeting, which starts on Sunday, giving him the status of "state leader" and exempting him from retirement.

The CPPCC conference runs in parallel to the annual National People's Congress, which begins two days later.

The events will see the new leaders of the Communist Party, under general secretary Xi Jinping , step up to positions of national leadership, as president in Xi's case.

"Four year after China's economy was rescued by a huge loan-fuelled stimulus, its economic growth continues to be shored up by an unsustainable dependence on credit," said Mark Williams, a economist at Capital Economics, an independent macroeconomic research consultancy firm based in London.

Concern about the credit bubble wasn't the only reason for keeping Guo on at the securities watchdog. The Oxford-educated Guo has also put forward a number of bold reforms aimed at curbing the market manipulation, insider trading and poor corporate governance that have left mainland stock markets battered even as the economy has continued to expand.

When Guo, a former chairman of the China Construction Bank, was appointed to head the commission in October 2011, hopes were raised that a brave new era was dawning for equity markets.

However, rather than living up to the regulator's role of protecting minority shareholders' interests, Guo was criticised for instead allowing state-owned enterprises to raise capital in the markets at an inexpensive rate.

But Guo did point out that there is "a lack of market integrity and legal awareness" among some listed businesses. Some listed firms make "fraudulent disclosures and financial statements", he added.

However, his failure to take pragmatic actions was hardly likely to convince investors to jump into the Chinese markets and run the risk of suffering due to insider trading and market manipulation.

Beijing is eager to create a positive image for the stock markets at home after poor performances in the three years up to 2011.

The benchmark Shanghai Compositive Index rose more than 3 per cent last year, thanks to a significant improvement late in the last quarter.