"Given the extent of the monetary stimulus, and the extent of the overheating, the economy, if it hasn't slowed down enough, needs to slow down further." she added.
China's industrial output in August jumped 13.9 percent year-on-year growth from 13.4 percent in July, exceeding expectations. Consumer prices jumped 3.5 percent, the most in 22 months, as food costs climbed, compared with 3.3 percent in July.
Choyleva said China may have to face significantly slower growth, to make up for the huge growth generated by stimulus spending.
"Having engineered the most gigantic stimulus, ever, in its own history... you have to have the consequences of having growth significantly below trend, to correct for that overheating," she said.
Choyleva said China "needs higher interest rates", and monetary conditions are set to tighten which is ultimately "not good news for Chinese equities."