The proposed Yuan1trn capital injection for the six largest banks would be pre-emptive, while China is also quick to merge weaker/failing small to mid-sized banks.

However, rising NPL’s with low policy rate and pressure to rollover LGFV/SOE debt will likely all ensure that overall lending growth is restrained in the next few years. Additionally, rising NPL’s/confidence concerns could cause more small and mid-sized banks to run into solvency issues and this could cause intermittent 2 tier banking stress and mini crisis in China.