There is a strong chance of a serious credit event – or financial jolt – in China this year, one of the top economists at Credit Suisse has told a conference recently hosted by the banking group in Singapore.

There is a strong chance of a serious credit event – or financial jolt – in China this year, one of the top economists at Credit Suisse has told a conference recently hosted by the banking group in Singapore.

The warning was issued by Dong Tao, chief regional economist for Switzerland’s second-biggest bank, at the firm’s Global Megatrends Conference.

The compound affects of Beijing’s reform, retreat and risk policy initially aimed at state owned enterprises is really beginning to bite, he said.

As the Mainland economy slows, Tao said he did not expect to see an aggressive stimulus package from the Chinese central bank similar to that which the US and European counterparts, or indeed the Bank of Japan, had initiated. Chinese authorities are keen to teach fiscal lessons to those who had over-borrowed and leveraged during the recent boom times, he said.

Tao is hardly the first such economist to warn of such a credit event. Earlier this year, Goldman Sachs told this publication that there is a very high probability of a financial sector crisis in the Asian giant in the next few years. Worries have been stirred about the Chinese “shadow banking” system and the near-failure - averted at the last minute - of a wealth management product issued via ICBC. Chinese state-run banks have been infamous for their opaque balance sheets, while there are concerns of malinvestments. However, the ruling Communist Party’s pledge to enact a raft of important reforms to SOE’s has cheered investors about the country’s longer term prospects.

The plight of Chinese investment trusts and wealth management products, is, however, about to get worse as a myriad of wealth management products and trusts are due to mature throughout the second half of this year, Tao told the conference.

Tao did, nonetheless, hold out hope that the non-SOE business streams will continue to grow and could offer potential investment opportunities. The IT and technology sectors are a cause for optimism, he said. Another bright spot is the expanding influence of the Chinese on-line retail players.

Although he does not cover Japan, Tao briefly referred to the outlook for that market with a throwaway line that he the considered the policy of ‘Abenomics’ a joke. (He referred to the three-pronged policy of premier Shinzo Abe, which looks at monetary, fiscal, and supply-side stimulus for the Japanese economy.)

Attendees at the event included the following: Hans-Ulrich Meister, Credit Suisse’s head of private banking and wealth management; chief executive officer, region Switzerland; Francesco de Ferrrari, the bank’s head of private banking Asia Pacific. Other speakers included Mochtar Riady, founder and chairman, The Lippo Group and chairman, Asian Bankers Association; Susan-Dietz Henderson, China Affairs Director, Capital Group; Ng Kok Song, advisor and chair for global investments, GIC Private Limited; Le Thi Thu Thuy, president of executive board/general director of VinE-com Vingroup; V P Sharma, group CEO, MAP – PT Mitra Adiperkasa Tbk; Shaun Rein, managing director China Market Research Group; Charles Adler, co-founder, kickstarter.com; Josh Brewer, former principal designer Twitter; Mike Peng, co-founder and co-managing director of IDEO, Japan; and Leroy Chiao, astronaut and International Space Station Commander; and Lito Camacho, vice chairman Asia Pacific and Singapore CEO, Credit Suisse, was a moderator.