China is flashing warning signs that a financial crisis may be approaching, say two Nomura economists.

Those signs include a sharp rise of leverage, a slowdown in economic growth and skyrocketing property prices, assert Nomura economists Zhiwei Zhang and Wendy Chen in a research note obtained by CNBC.

Ominously, those were the same factors behind the 2008 financial crisis in the United States.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

“China faces rising risks of a systemic financial crisis and the government needs to take action quickly to contain such risks. We believe the true extent of financial risks in China is not fully appreciated by investors,” they state.

However, China may be able to avoid a crisis by tightening its monetary policy, they say. “This is clearly a dangerous choice, but we cannot rule it out given political pressures to maintain strong growth.”

Leverage, defined as the ratio of domestic credit to gross domestic product (GDP), has increased from 121 percent in 2008 to 155 percent in 2012. That’s the highest since record keeping began in 1978.

“China’s leverage rose by 34 percent of GDP in five years — a worrying sign given its history,” they write, according to CNBC. By comparison, leverage in the United States increased by about 30 percent of GDP in the five years preceding the financial crisis.

Economic growth in China slowed to 7.8 percent last year, the lowest rate in 13 years, due to falling productivity and population growth.

Chinese officials say housing prices more than doubled between 2004 and 2012 in major cities. But the Nomura economists, noting that large increases in asset prices often precede financial crisis, question the official data and say real estate prices increased 250 percent, CNBC reports.

According to the S&P/Case-Shiller home price index, home prices increased 84 percent in the U.S. real estate boom from 2001 to 2006.

The economists are not optimistic about Chinese government efforts to control rising prices. “The pattern has been for house prices to initially dip after tightening policies are introduced, then to rebound, which suggests that the risks have not been mitigated.”

A real estate bust could hit local governments hard and prompt a spreading banking crisis. Local governments rely on land sales and property transaction taxes to fund operations, according to The Wall Street Journal.

If they don’t sell land, they can’t even pay salaries, says Li Shenming, a National People’s Congress legislator, The Journal reports.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.