A leading Asian investment bank has warned that a new financial crisis is emerging in China, as debt levels rise to unsustainable levels.

Debt in China is believed to be between 150 and 200 per cent of GDP, pushed up by easy monetary policy the government has used to foster economic growth.

Nomura's chief economist Rob Subburaman says there is a real danger of China being engulfed in a financial crisis similar to what has happened in the United States and Europe.

"If it's not dealt with this year and policies remain easy, I think it's a significant risk," he said.

"The international experience now is littered with examples where if you have a quick run up in debt, the effects on the real economy can be very severe."

Micheal Pettis, professor of finance at Peking University, agrees China's public debt is a key issue.

"I think by now there is a consensus that if this continues another 3 or 4 years we run the risk of a debt crisis," he said.

Mr Pettis told Radio Australia that China's growth rates have probably been significantly overstated.

"It's been growing in real terms less than the official numbers which have been 10-12 per cent. And that's part of the problem."

China's economic growth is largely dependent on investment, including the building of property and infrastructure - which equals more debt.

But Mr Pettis says Beijing needs to greatly lift its efforts at rebalancing the economy now to avoid a financial crisis in the next few years.