As year-end approaches, Chinese leaders have announced several measures designed to stimulate a slowing economy, recapitalise the banks and give comfort to depositors that their savings are safe in Chinese banks. In addition, the long-awaited Shanghai–Hong Kong Stock Connect between the Hong Kong and mainland stock exchanges was launched to a somewhat muted reaction. While to some observers it may appear that China is making progress with its stated goal of financial reform (ie. deposit insurance and interest rate liberalisation), to many “old China hands” it looks like China is preparing the public for massive write-offs of nonperforming loans and increasing distress from trusts, wealth management products and local government investment vehicles.

Since June 2014, the People’s Bank of China and other regulatory bodies have pumped more than €230 billion into the banking system to shore up capital adequacy in light of the fastest growth of NPLs since the banks went p