What happened in the past?
The Asia Crisis happened when Asian countries' huge dollar-denominated debts became unsustainable in the late 1990s. Investors rapidly withdrew money across the region, causing a balance of payments crisis, forcing sharp currency devaluations and a widespread crisis.
In contrast, the Global Financial Crisis in 2008 stemmed from excessive leverage, misallocation of credit to subprime households, unregulated lending to the economy through 'shadow' banking channels and poor underwriting standards.
What parallels does China have with past crises?
Looking at the Asia Crisis, there are some similarities, mainly through the build-up of debt and possible inefficient allocation of credit to concentrated areas of the economy.
Looking at the GFC, China's recent experience of rapid credit growth, the emergence of wealth management products and shadow banking, plus large swings in housing and equity markets, have some similarities to conditions prior to the start of the GFC.
How is China different?
While it's true that China has a large and growing debt burden - equal to 257.64% of GDP at the end of 2016, compared with 161.1% in 2006 - the debt situation is quite different to those that caused the aforementioned crises.
For starters, while it's true that there has been some inefficient allocation of credit, debt is concentrated differently in China. Debts are largely owned by state-owned enterprises and owed to the government, which means the government can coordinate orderly debt restructuring.
Also, almost all domestic debt is financed via Chinese banks, and external, dollar-denominated debt is low, which means little or no risk from the massive withdrawals by outside investors which caused the Asia Crisis.
Furthermore, China has a very strong trade position. China's large balance of payments surplus, plus enormous FX reserves and capital controls, protect the financial system from capital flight.
China has a high savings rate, which means banks have huge capital resources. Domestic savings are very high and capital markets are under-developed, so saving largely exists as deposits or quasi-deposits in the banking system to finance debt.
Finally, and most importantly, China's regulators have learnt the lessons of the past, are well aware of credit growth and the shadow banking system, and are taking steps to rein in excess debt growth. These factors, combined with the above points, mean that a domestic financial crisis in China is highly unlikely.