China's sudden stock crash could increase financial volatility requiring tougher government monitoring though its impact on the local market would be limited, South Korea's top economic policymaker said Tuesday.

In a meeting with leaders from the country's financial sector in Seoul, Finance Minister Choi Kyung-hwan pointed out Monday's crash and mounting geopolitical uncertainties in the Middle East are heightening concerns across the board.

"The market seems to be responding excessively even to relative minor developments," said the official, who doubles as deputy prime minister in charge of the country's financial affairs. "Under such circumstances it is likely that market volatility will be an issue for the time being."

Trading on China's stock market was suspended completely after share prices plunged more than 7 percent, even after regulators enacted the circuit breaker systems to calm investors.

The crash follows disappointing industrial output figures for the world's No. 2 economy in December. The panic caused stock markets in Asia and the United States to give up ground, with South Korea's benchmark KOSPI dropping 2.2 percent during the trading session.

Choi said to cope with this development, the government will raise monitoring of the financial and foreign exchange markets and redouble efforts to alleviate undue concerns.

The minister then emphasized that for the time being, global market jitters will have a limited impact on the domestic economy.

Reflecting this, South Korea's benchmark KOSPI gained 11.77 points, or 0.61 percent, to end Tuesday's trading at 1,930.53. The U.S. dollar that shot up a sharp 15 won vis-a-vis the Korean won on Monday, also lost ground to the local currency as the market regained some of its composure.

The policymaker's remark comes after Choi Hee-nam, deputy finance minister for international affairs, said after an emergency meeting earlier in the day that Monday's scare may have been due to "technical issues" like the introduction of the circuit breaker system. He suggested that the system may have inadvertently triggered panic among investors.

"While China's industrial output numbers were not good, other indicators are not that bad," the official stressed. (Yonhap)