Renowned short-seller Jim Chanos, who has been bearish on China's economy for several years, says its cracks are starting to show.

The government is "panicking" in light of the economy's slowdown, he tells CNBC.
China's GDP expanded 7.7 percent in the fourth quarter, and the government has adopted a growth target of 7.5 percent for this year.

Chinese officials announced Wednesday that they will cut taxes for small businesses and increase railway construction. The Chinese government has implemented these "mini-stimulus" programs for years, argues Chanos, president of hedge fund manager Kynikos Associates.

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"One has to keep in mind, if you're a Western investor in stocks and bonds in China, you are participating in a scheme, not a market," he notes. "This is important. You are basically providing capital to them, and you might not see any profits or dividends from them.

"China is the only major economy that knows its GDP for the year on Jan. 1," Chanos adds.

Unoccupied housing developments are rife in China, but vacant construction projects are counted as part of its GDP, he explains. And the country's construction bonanza has been financed largely on credit.

"Anybody who thinks that can't collapse because of too much lending has not looked at economic history."

The stimulus measures announced Wednesday show "policymakers don't want to take the risk of seeing growth slipping to below 7 percent," HSBC economists Qu Hongbin and Sun Junwei write in a commentary obtained by The Associated Press.

But Capital Economics analysts say in a commentary that the moves are "simply reheated versions of previous announcements," AP reports.

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