Concern raised over China credit growth

Mainland banks are adding assets at the rate of an entire US banking system in five years. To Charlene Chu of Fitch Ratings, that signals a crisis is brewing.

Total lending from banks and other financial institutions on the mainland was 198 per cent of gross domestic product last year, compared with 125 per cent four years earlier, according to calculations by Chu, the company's Beijing-based head of China financial institutions.

Fitch cut the nation's long-term local-currency debt rating last month, in the first downgrade by one of the top three rating companies in 14 years.

"There is just no way to grow out of a debt problem when credit is already twice as large as GDP and growing nearly twice as fast," Chu said.

Chu's view puts her in a minority among those charting the future of the world's biggest nation. She questions how long China can maintain growth through bank lending that has allowed its economy to sidestep the global financial crisis.

Fitch's sovereign-debt downgrade to A-plus, the fifth-highest level, has sparked a debate in which Chu's calculations have been called "biased" by one economist and a "misinterpretation" by a stockbroker.