Timetable for reform

She argues that the increased bank lending in China since 2009 of around $15 trillion is equivalent to the entire size of the US commercial banking sector.

According to Pettis, it is over-investment that is causing the debt to pile up at such a rapid rate.

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Some 49 percent of China's GDP was made up of investment, compared to 19 percent in the US, 15 percent in the UK, 17 percent in Germany and 20 percent in France, according to World Bank statistics published last year.

China's consumption, however, was languishing at 36 percent, compared to 65 to 70 percent in the US and many European countries.

Is the China economic model as fragile as Pettis and others make out? What is wrong with an economy that by most estimates has two more decades of fast development left?

Martin Wolf, chief economics commentator at the Financial Times who has been following the Chinese economy for more than 20 years, says it would be possible to make the assumption the economy could be heading for a crash.

"This is an extraordinary unbalanced economy and showing signs of getting worse. If you were looking at any other economy you would say that there could well be a financial crisis and then afterwards a substantial diminution of economic growth rates."

He says that such a judgment, however, would be ignoring China's track record of the past 35 years and the control the government retains over the economy.

"The Chinese government effectively controls all the levers in the economy and it can use them in a way that almost no other country has been able to do. The government in itself is also enormously solvent. A third factor is that China is still a relatively poor country and in principle still has good growth potential as catch-up continues."

Wolf believes the government still needs to engineer an adjustment where investment falls to around 35 percent of GDP but this does not have to lead to a collapse in growth.

"I am perhaps more optimistic than Michael (Pettis) that the government could take actions to cushion the adjustment but I think it would be a mistake for them to prevent it."

Some high profile Chinese economists see no problem with China's investment-fueled growth model.

Liu Zhiqin, senior fellow at the Chongyang Institute for Financial Services at Renmin University of China, says the country needs a high level of investment because it is still a developing nation. "For a developing country investment is the main driving force for the economy and consumption is something additional.

Deepening reforms can help China tackle challenges	FDI registers healthy growth