Fears over an outbreak of bird flu in China have sent Chinese markets tumbling to multi-month lows Monday. The illness has reportedly claimed the lives of six people, while CNN reports Chinese officials killed 20,000 birds in response. Asian airline stocks have suffered the most on concerns that the outbreak will hurt demand for travel.

Related: Buy U.S., Sell China? Not For Much Longer

Michael Pettis, finance professor at Peking University in Beijing and senior associate at the Carnegie Endowment for International Peace, shrugs off the threat.

“Oh no not again,” Pettis, tongue-in-cheek, tells The Daily Ticker at the 2013 Wine Country Conference benefiting the Les Turner ALS Foundation. “The tendency is for us to get overly excited.” Pettis, who lived in China during the SARS scare last decade, says there's a better chance of dying of pneumonia in New York than of SARS in China.

Avian flu aside, there are plenty of real concerns Pettis is watching when it comes to China’s economy.

“I don’t think it’s either averting a disaster or heading for one,” Pettis says. “What I think we’re going to have is a decade or more of much, much lower growth.” Here’s what he’s keeping his eye on:

• How quickly growth adjusts. Pettis wrote a piece arguing the speed with which China’s GDP growth slows in 2013 will show us how determined Beijing is to rebalance the economy. (The idea being that China’s economic model built on government investment and exports is not sustainable, and that the country has to move towards more reliance on internal consumption.) Pettis expects growth to drop sharply, perhaps coming in close to 6% during the second half of 2013 if Beijing is on top of the problem. If not, he expects growth to remain above 7% during this period, which would worry him. “The key thing to watch is growth rate of debt, and I think everybody’s very worried about that,” Pettis tells The Daily Ticker. “When credit is growing very quickly you’ll get more GDP growth and when it’s slowing down you’ll get less.” In other words, all growth isn’t good growth.

• Inflation. Pettis argues we actually want to see inflation rise. He says it’s a positive indicator for China’s rebalancing. It would mean consumption of manufactured goods is rising faster than production. The more you repress household income growth, the more you divert resources, especially through cheap financing. This tends to be disinflationary, he argues.

• Financial Scandals. According to Pettis, the Chinese financial system doesn’t really “do” defaults. When borrowers are unable to repay the debt, the problem is usually dealt with by forcing losses on some other entity. Also, when these problems arise they tend to be immediately suppressed, so information doesn’t leak out. So when you hear stories of bank defaults and bank runs – even small ones – this is a red flag. Pettis says they are coming out almost weekly, suggesting credit in China has been unsteady.