Kyle Bass, founder of hedge fund Hayman Capital Management, made the case for why his firm is making a big wager against the yuan.

“Very few people have looked at kind of what the cause of the problem is [in China] and I believe the cause of the problem is No. 1, the real effective exchange rate since 2005 has appreciated 60%,” explained Bass during an interview on CNBC Wednesday.

Bass’s bet against Beijing’s currency is worth noting, given some of his successful trades. The hedge-fund manager was one of the few investors whose prescience resulted in him making billions during the heart of the U.S. subprime mortgage crisis.

Bass’s main point is that the share of bad loans at China’s banks is growing and has the potential to roil the world’s second-largest economy. Bass questions whether China’s banks have enough capital on hand to weather tough times, particularly as its economy shows signs of slowing.

“This isn’t an aberration. This isn’t a speed bump. This is China’s excess — let’s call it misallocation of capital — coming home to roost,” Bass said.

“You can’t grow your banking system 1,000% in 10 years and not have a loss cycle. And your currency won’t stay strong when you go to rectify that balance,” he said. The hedge-fund manager said China’s banking system has ballooned to $34.5 trillion from 2005 to 2015. By comparison, China’s gross domestic product was $10.2 trillion, according to data from the World Bank.

Bass isn’t alone in his bearish outlook for China. Founder and managing partner of Kynikos Associates Jim Chanos maintains that Chinese banks are poorly capitalized and that the country’s debt-fueled economy isn't sustainable.

Stanley Druckenmiller of Duquesne Capital, David Tepper of Appaloosa Management, and David Einhorn of Greenlight Capital are among a star-studded list of hedge-fund titans shorting the yuan on expectations that China’s economic growth will sputter.

In the past few days, billions of dollars in new bets against the currency have been placed on expectations that China could further depreciate the currency as early as this month, according to Reuters.

Last week, China’s government warned George Soros against waging a war on the yuan, after the billionaire investor predicted a so-called hard landing in China.

“The fact that there is such hypersensitivity around the subject leads me to believe we are right there,” said Bass.