The world economy will not see a second round of recession and the plunge in major stock markets was only a correction of previous overheating, said Fan Gang, a former adviser to China's central bank's monetary policy committee.

Fan made the remarks on Saturday during the fifth Annual China Bankers Forum 2011 in Beijing.

"There is no trend for a double dip in economy right now," said Fan, adding that the current situation is just a less optimistic one.

According to Fan, emerging economies, including China, will not be affected much by the turmoil in western stock markets. However, he added that emerging markets should be more prudent than their developed counterparts because they are more vulnerable to outside risks.

Investors started to lose confidence in a global economic recovery after international rating agency Standard & Poor's downgraded the US long-term credit rating from AAA to AA+.

Chinese shares also took a dive, with the Shanghai composite index down nearly 1 percent on Aug 19 after the Wall Street freefall.

"There is no need to panic. Emerging markets have become much more independent of developed economies since the start of the financial crisis in 2008, " said Fan.

Fan noted that the scale of sovereign debt at risk of default in Europe and the United States lags far behind the level in 2008. However he did suggest China further tighten its monetary policy by selling more central bank papers to counter increasing capital inflows in the upcoming months.

"There is still room for further tightening by the government," Fan said.

China's consumer price index, a key gauge of inflation, rose 6.5 percent year-on-year July to a three-year record high.

In an effort to tame inflation, the central bank has hiked interest rates for three times and increased the reserve requirement ratio for commercial banks six times since the beginning of this year.

China may still face "relatively large" pressure from capital inflows in the second half of the year, said the State Administration of Foreign Exchange earlier this month.