Deutsche Bank warned where the next financial crisis could happen

Deutsche Bank analysts have warned China could be at the centre of the next financial crisis. Research by the bank’s strategists Jim Reid, Nick Burns, Sukanto Chanda and Craig Nicol found China still needs to reposition its economy "from manufacturing to services and investment to consumption.”

"This includes valuations in many asset classes, the incredibly unique size of central bank balance sheets, debt levels, multi-century all-time lows in interest rates and even the level of potentially game changing populist political support around the globe. If there is a crisis relatively soon (within the next 2-3 years), it would be hard to look at these variables and say that there was no way of spotting them."

But in a report, Deutsche Bank also warned this move needed “to take place in the context of also containing the rapid growth of credit in our view."

The report said: "Rapid credit expansion due to an insatiable demand for debt fuelled growth, compounded by a hugely active shadow banking system, as well as an ever expanding property bubble fuelled fears for economists that China could inevitably make a hard landing and send shockwaves through the world's financial markets. However, the economy has seemingly defied the odds."

Deutsche Bank also highlighted a number of other areas that could be cause for concern for the global economy.

The possibility of Brexit “going wrong” was also viewed as a worry but analysts saw the ongoing negotiations as a “complicated issue with many potential outcomes over the years ahead."