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Asset Bubbles an Emerging Risk in China

China's pump priming is unlikely to form asset bubbles now, but the risk is emerging, Frederic Neumann, senior Asian economist at HSBC, told CNBC.

"We do think that in China and elsewhere, asset bubbles are real risks but we've put the timing a little bit further out," Neumann told CNBC. "(While) over the next 2 or 3 years, there is a risk of asset price bubbles, it is important to recognize that as of today, we are not in a bubble yet."

China's export-oriented economy was hit hard as global financial crisis unfolded late last year, but the government's aggressive fiscal and monetary stimulus measures helped stave off a recession. For the third quarter ended September 30, 2009, China's economy grew an annualized 8.9%, which was in line with expectations and far exceeding the growth numbers being recorded elsewhere.

Despite the positive economic data, Neumann said the Chinese government is unlikely to remove these stimulus measures any time soon.

"(I) think that the Chinese government would withdraw the fiscal stimulus before they actually withdraw the monetary stimulus and the reason for that is that the Chinese authorities want to ensure that the private sector is really driving growth. So you withdraw the fiscal stimulus before you actually start to tighten monetary policy."