The next shoe to drop in China? The banks

``Any signs that the fault line in China's highly leveraged economy is spreading to its financial system, brings with it another layer of potential systematic risk. This always looked a possibility when authorities used the banking system and public funds to support equity markets... the default position of the PBOC to inject another round of monetary stimulus now looks fraught with risk. Lowering reserve ratios may indeed provide banks with fresh liquidity and they can restock ATMs with cash. But the risk is this just leads to accelerating capital outflows and weakening of banks' deposit base.''