The Bank for International Settlements (BIS), a leading global financial watchdog, has raised concerns about the growing level of banking stress in China. A report released by the BIS highlighted China's increasing corporate debt. China's banking stress level in the first quarter was at its highest since 1995.

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The report showed that China's credit-to-gross domestic product (GDP) has "gap" touched 30.1 percent. Any level above 10 percent indicates a concerning level of banking strain. Such a large credit-to-GDP gap may forecast a financial bust as it indicates excessive credit growth.

According to Bloomberg, the level of risk indicated by the "gap" may be mitigated by the fact that in China, the financial system is controlled by the state. The country's relatively low levels of overseas debt may also provide some relief.

The People's Bank of China issued a financial stability report in June which showed that lenders might be able to maintain high levels of capital, even in the case of shocks.

The Telegraph reported that China's total credit was reported at 255 percent of its GDP as at the end of last year. It has jumped by 107 percent over the course of eight years. China's outstanding loans are at $28 trillion, while the country's corporate debt stood at 171 percent of its GDP.

The International Monetary Fund (IMF) has also raised concerns about rising debt levels which "must be addressed immediately." The current gap in China's credit-to-GDP shown by the latest BIS report surpassed the levels of 41 other countries and the eurozone.

TagsBank of International Settlements, BIS, people's bank of china, International Monetary Fund