China facing possible debt crisis: Bank watchdog

China's banking sector could be facing an imminent debt crisis, a global central bank watchdog has warned, fuelling fresh fears about a blowout in the world's number two economy that could hit the global economy.

The Bank for International Settlements (BIS), dubbed the central bank of central banks, said a gauge of Chinese debt had hit a record high in the first quarter of the year.

China's credit-to-GDP gap reached 30.1 percent in the first quarter of 2016, its highest level ever and far above the 10 percent level associated with banking risks, the Switzerland-based bank said in a quarterly report released late Sept. 18.     

The gauge measures the difference between the credit-to-GDP ratio and its long-term trend.

The BIS gave China a red signal, a level it said was intended to indicate the possibility of a financial crisis in the three years ahead.

China's total debt hit 168.48 trillion yuan ($25 trillion) at the end of last year, equivalent to 249 percent of national GDP, the China Academy of Social Sciences, a top government think tank, has estimated.

The warning comes as Beijing tries to avoid a so-called hard landing for the economy while transforming it from one based on state investment and exports to consumer-led growth.

Analysts have warned that the ballooning borrowing risks sparking a financial crisis as bad loans and bond defaults increase.

Because China is a key driver of world growth, a crisis in the country's banking sector could have catastrophic implications around the world, with the global economy still struggling to recover from the 2008 financial crisis.

China's credit-to-GDP gap for the period was well above all other countries in the survey, which covered 43...