Moreover, the Chinese government is very knowledgeable over what the debt risks are, he noted, though it will just take more time to solve them, because the government has to get all these people involved, including local governments, banks, trust companies, other non-bank financial institutions.

Mukherji said that right now it becomes much more complicated with so many players involved in the government debt, which adds element of risk to it.

"Now you can't put them all in a room. It has to be done in a more indirect manner," he said, adding that the Chinese government is using more indirect tools now.

On Monday, Moody's Investors Services, another big rating agency, posted a report saying that China's government debt level is manageable but a large accumulation in local authority arrears is credit negative.

As for China's shadow banking, which is becoming a source of instability in the country's financial system, Mukherji considered it as a mixed picture.

On the one hand, some businesses China's shadow banking does are kinds of normal things that other institutions do in other countries.

He said there is a lot of shadow banking, including leasing companies, giving loans to customers who do not have access to banks.

On the other hand, it is obviously creating non-performing loans, he said, adding that most risks of the bad loans probably happened in the last few years.

"You can't generalize the whole thing and say it's all good or all bad," he emphasized.

"Obviously it's not as well regulated, as transparent as the regular banking system. That's why we have all these problems," Mukherji said.