Hedge fund manager Kyle Bass says that China’s economic challenges are so vast that they “have no precedent.”

The Hayman Capital Management founder wrote in a letter to investors Wednesday that China’s banking sector is set for disaster after swelling to ten times its size in as many years. He says that the banking boom filled the sector with risky financial products, threatening a crisis with losses for Chinese banks totaling more than four times what the U.S. banking sector suffered after the subprime mortgage crisis.

“The unwavering faith that the Chinese will somehow be able to successfully avoid anything more severe than a moderate economic slowdown by continuing to rely on the perpetual expansion of credit reminds us of the belief in 2006 that US home prices would never decline,” Bass wrote in the 11-page letter. The banking sector has swollen to 340% of GDP.

If the Chinese banking system loses the trillions of dollars in equity that Bass expects, the central bank would be hard-pressed to protect the renminbi from fall-out. Almost any lever the Chinese central bank would use to destabilize the financial industry—cutting interest rates, printing money, or introducing fiscal stimulus packages—would put downward pressure on the nation’s currency.

China devalued its currency in August and has further weakened the yuan since, sparking global concern about a potential currency war.

Bass writes the renminbi is particularly vulnerable because China’s reserves are far less liquid than the central bank claims—an assertion that, if true, means that the country is quickly using up its main protection against being forced to significantly devalue to renminbi. He estimated that China’s liquid foreign reserves stood at $2.2 trillion at the most—more than $1 trillion below official estimates. By the end of the loss cycle, the renminbi could fall by as much as 30%, by Bass’s estimations.

“China is CURRENTLY out of the required level of reserves needed to safely operate its financial system,” Bass wrote in the letter. “The view that China has years of reserves to burn through is misinformed,” Bass wrote in the letter.

Hayman Capital Management has focused on shorting Asian currencies for the past year—the firm’s biggest concentrated bet since it predicted the subprime mortgage crisis, according to The Wall Street Journal. Other hedge fund heavyweights including Soros Fund Management and Greenlight Capital are reported to be shorting Asian currencies as well, The Journal reported.

China devalued the yuan in August, but the central bank has since said, in both public and private communiques, that it plans to hold the currency relatively stable.