For China's economy, the future remains uncertain in 2016 and could yield dire consequences, economists warned Sunday. With debt reaching record levels of 237 percent of gross domestic product, the second largest economy in the world risks either an ongoing slowdown or an acute financial crisis.

It is wrong to assume that ‘too much debt’ is bad only if it causes a crisis, and this is a typical assumption made by almost every economist," Michael Pettis, professor at Peking University’s Guanghua School of Management, wrote in a draft of a forthcoming paper shared with the Financial Times. “The most obvious example is Japan after 1990. It had too much debt, all of which was domestic; and as a consequence, its growth collapsed," the paper said.

A stock market slowdown in August 2015 saw the Shanghai Composite fall 8.5 percent, its worst single day in eight years. China’s economic growth has continued to contract since that period, as economists debate the future of Asia’s largest economy, with some saying the present situation is the result of growing pains and others predicting a riskier and potentially grim future.

Beijing has borrowed trillions of dollars both domestically and abroad in an attempt to stimulate the economy — a move that carries a great deal of risk, economists said. The private sector is included in China’s estimated $25 trillion in debt, according to the same Financial Times report, with companies borrowing trillions countrywide to repay interest in a volatile system that could turn the financial sector into a kind of Ponzi scheme.

“Some Chinese firms have entered the Ponzi stage because return on investment has come down very fast,” Shi Lei of Ping An Securities Co., a unit of the nation’s second biggest insurance company, told Bloomberg in November, adding, “As a result, leverage will be rising and zombie companies increasing.”