The rampant growth of credit in China appears to be forming a bubble, Jim Chanos of Kynikos Associates said Wednesday.
Chanos, who has been bearish on China, said that its economy has been deteriorating. "I actually think it's gotten worse."
On CNBC's "Fast Money," he said that credit was to blame.
"New credit outstanding jumped by $1 trillion U.S." he said, adding that China's economy was equivalent to $8 trillion in U.S. dollar terms. "So, on an annualized rate, that's 50 percent of GDP, new credit creation.
"To put that in perspective, the total new credit globally went up by a trillion and a half in the first quarter. China was $1 trillion of that, yet it's only 10 percent of the world economy."
Chanos said that the trend was a red flag.
"So there is a credit bubble that's actually not only huge but getting bigger," he added.
Chanos, a short-seller, said that he was interested in "booms that go bust."
"You look for asset inflation where the asset being inflated by credit does not generate enough cash to service the debt," he said.
In China, that appeared to be real estate, Chanos added.
"That would be almost anything related to real estate or construction in China, so property companies, cement companies, steel, and then, of course, companies selling into that, that bubble, iron ore and mining, those sorts of things," he said.
"Inexorably, you can't keep growing your credit at 50 percent of GDP. Something's going to give. When? I don't know."
Editor's note: Chanos will appear at the 18th annual Sohn Investment Conference in New York on May 8. An on-air mention of the event incorrectly stated the date.
Trader disclosure: On April 24, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Steve Weiss is long T; Pete Najarian is long AAPL; Pete Najarian is long INTC; Pete Najarian is long BBRY; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Pete Najarian is short SBUX PUTs; Pete Najarian is short BX Puts.