While China's housing market problems are similar in scale to those faced during the U.S. subprime mortgage bubble and its banks are rife with bad loans, it won't lead to another Lehman-style crash, Franklin Templeton's Mark Mobius told CNBC on Monday.
Mobius said the similarities could not be denied but since Chinese banks are owned by the government, they will not be allowed to fail.
Investor fears have been heightened after a credit crunch last week led to a spike in yields on inter-bank loans. Some analysts have pointed out the credit crunch was spiked by China's central bank tightening liquidity, rather than a loss in confidence among banks.
Still, nervousness led to big drop in Chinese stocks on Monday, with the Shanghai Composite tumbling 5.3 percent to its lowest levels since early December.
"The perception of China is they are in the same kind of situation as the U.S., and yes it is true that a lot of loans are going to go bad, and that banks have been hiding a lot of these loans in so called trust companies," Mobius said on the sidelines of the FundForum conference of asset managers in Monaco.