Bill Gross
Bill Gross, who founded Pimco, labelled China an unknown quantity Reuters

The danger of default for China's banks climbed to a six-month high and service industries recorded a slowdown, following comments highlighting uncertainty in the country's markets from Pimco chief Bill Gross.

According to Gross, who co-founded global investment manager Pimco, a lack of transparency and credibility in the data available about China's economy was a mounting concern for investor sentiment towards the country.

"I call China the mystery meat of emerging-market countries. Nobody knows what's there and there's a little bit of bologna, so we're just going to have to wonder going forward through this year as to the potential problems in China and other emerging markets.

"The last wild card, Erik, in terms of emerging-market space, obviously is China. Is it 6%? Is it 7%? Is it 5%?" He said to Bloomberg Television in an interview.

Meanwhile, concerns about the credibility of loans in China's financial sector were reflected as contracts protecting against non-payment by Industrial & Commercial Bank of China jumped 23 basis points this year to 155.

Those for JPMorgan rose two basis points to 69, while Chinese and Hong Kong issuers accounted for four of the five biggest increases among Asian finance companies.

Similarly, China's service sector growth eased to a five-year low in January, indicating a slowdown in the country's growth momentum and continued woes for the emerging markets.

The National Bureau of Statistics (NBS) said China's official non-manufacturing Purchasing Managers' Index (PMI) declined to 53.4 in January from 54.6 in December. The reading is the lowest level since December 2008.

An index reading above 50 indicates expansion in the sector.

Although China is currently the world's fastest-growing major economy, its economic growth has slowed down in 11 of 14 previous quarters.

For the full year 2013, the world's second-largest economy grew 7.7%, unchanged from 2012 and the slowest pace of growth since 1999.