Prominent hedge fund manager Kyle Bass' call that a China banking crisis is imminent is already getting push-back, with Deutsche Bank calling it unlikely and exaggerated.
"We think the article basically referred to a hard-landing scenario, for which our economist only assigns 20 percent probability in 2017-19," China bank analysts at Deutsche Bank said in a note Thursday.
Bass, who is famed as one of the few major investors to correctly call the U.S. subprime housing collapse that kicked off the 2008 global financial crisis, said he expected a China credit crisis that could see the country's banks rack up losses 400 percent larger than the around $650 billion equity hit U.S. banks took during the subprime mortgage crisis.
"Chinese banks will lose approximately $3.5 trillion of equity if China's banking system loses 10 percent of assets," Bass, the founder of Dallas-based Hayman Capital, wrote in the letter to investors dated Wednesday. "Historically, China has lost far in excess of 10 percent of assets during a non-performing loan cycle."