China can face a similar or even bigger financial crisis than the United States if the local Government debt remains out of control for long, says a Senior Chinese auditor Zhang Kew Hoc, who is also the vice chairman of China’s accounting association, report CNBC.

Zhang Ke said that his accounting firm Shine Wing, due to mounting concerns, is not signing off on bond sales by local governments. Zhang said that they audited local government bond issues, which was full of risks. “Most don’t have strong debt servicing abilities. Things could become very serious” he said

Worldwide financial institutions like International Monetary Fund, rating agencies and investment banks have been echoing the issues about Chinese debt. But Zhang is amongst the rarest from the Chinese financial industry to issue a warning.

He said that the debt is out of control and could lead to a fall of the Chinese economy. However, debts are long term and also being rolled over so the exact time as to when this could trigger a financial crisis is not known.

Earlier, there was news that the man-made Phoenix Island in China has seen a sharp decline in the property prices. Apartments that were available for 150,000 yuan per square foot in 2010 have shed their prices to as low as 70,000 per square foot.

There is a huge fund locked up in the real estate sector, which accounts for 13 percent of the GDP. If the sector comes down it will bring whole economy to the floor with it. Companies like Apple (NASDAQ:AAPL) in the United States are eyeing Chinese market as the most vital emerging market for their products. If the Dragon collapses, it will bring down world economy with it.

Local Government Bonds were at their peak in 2008 after Beijing made borrowing constraints flexible to ward off the affect of global economic crisis. As of now, it is estimated that Provinces, cities, and villages in China together account for Rmb10 trillion and Rmb20 trillion ($1.6 trillion and $3.2 trillion) of debt, which is equal to the 20-40 percent of the size of the economy.

Rating agency Fitch downgraded the sovereign credit rating of China in the previous week, which the first step is taken by any International agency since 1999. Moody also downgraded the outlook of China from positive to stable.

Prem Watsa also agrees that China has the ultimate housing bubble “in history”. In his 2012 shareholder letter, he had some interesting comments about China that read “In our 2010 and 2011 Annual Reports, we discussed the Chinese bubble in real estate. This past Sunday (March 3,2013), the CBS show “60 Minutes” did a segment on the Chinese residential real estate bubble. They showed vast empty cities with “new towers with no residents, desolate condos and vacant subdivisions uninhabited for miles and miles, and miles and miles of empty apartments.” They called it the biggest housing bubble in history. We agree! The ultimate collapse of this bubble will have major consequences for the world economy.”

China is an opaque economy and remains a challenge for the rating agency and economic indicators. The country holds the population of more than 1.3 billion. The non transparent administration in China makes it difficult as to get an idea when the property bubble will burst.