China has no need to actively engage in reducing credit, and to do so could cause a dramatic fall in investment and a further decline in the economy, Chinese economists said Tuesday.

The total credit-to-GDP ratio in China is significantly lower than that in major developed economies, Chen Yuyun, director of the Institute of Economic Policy Research at Peking University, said at a seminar in Beijing Tuesday.

Furthermore, an overemphasis on deleveraging by reducing growth of the money supply and loans could cause a collapse in investment, he warned.

According to Chen, the credit-to-GDP ratio, a measure used by economists to indicate a credit bubble, is 220 percent in China, compared with 512 percent in Japan, 507 percent in Britain and 279 percent in the US.

The leverage ratio in China is not high and total credit is controllable so there is no urgent need for China to actively deleverage, Chen said. 

Chen was commenting on a recent buzz word, "Likonomics", which was coined by economists at investment bank Barclays Capital in June to describe a raft of measures adopted since March by the State Council, the country's cabinet, led by Premier Li Keqiang.

Deleveraging is considered to be one of the three pillars of "Likonomics".

China experienced a liquidity crunch in June, which saw the overnight ­money-market rate, a key gauge of liquidity for the country's banking system, rise to 12.85 percent on June 20.

The central bank chose not to inject more cash into the money market as part of a strategy that analysts said was aimed at curbing off-balance sheet activities such as shadow banking.

"Overestimating the financial risks in China will risk misjudging the major problems in the economy," Cai Hongbin, dean of the Guanghua School of Management at Peking University, said at the same seminar.

The decline of investment demand is the major cause of the current economic decline. Balancing investment and consumption and improving the quality of investment is a must, Cai said.

The country's GDP grew by 7.5 percent from a year earlier in the second quarter, down from 7.7 percent in the first three months of the year, official data showed Monday.

It was the fifth straight quarter in which China's economy grew by less than 8 percent, which had been the country's annual growth target between 2005 and 2011. Fixed-assets investment rose by 20.1 percent year-on-year in the first half, down 0.8 percentage points from the first quarter and a decline of 0.3 percentage points from the same period of 2012.