China's financial system have been classified as MPI3 since last June. That means there's a 60% chance of a banking crisis by mid-2013, according to comments today from Fitch Ratings senior director Richard Fox to Bloomberg.
Historically an MPI3 classification suggests that crisis will occur within three years, as it did in Ireland and Iceland.
China's vulnerability is related to out of control real estate lending. Fox tells Bloomberg:
Fitch sees the risk of “holes in bank balance sheets” should a property bubble burst...
Chinese banks fueled record property-price gains by extending a record 17.5 trillion yuan ($2.7 trillion) of loans over 2009 and 2010 under the stimulus program that propelled the nation through the financial crisis. Regulators’ efforts to contain the risks for lenders have included stress tests for declines in house prices and a crackdown on lending to local- government financing vehicles.
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8.3.11
There's A 60% Chance Of A Chinese Banking Crisis By 2013 - Fitch Ratings
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