China’s economic skies are darkening, and the most recent storm cloud is forming over the banking sector. On the surface, the uptick in investments from the country’s sovereign wealth fund in some of the largest banks might seem like a silver lining.

Yet, this could be a forewarning of a tempest on the horizon.

A Mirage of Financial Support

The powerhouses of China’s banking sector – Bank of China, Agricultural Bank of China, China Construction Bank, and Industrial and Commercial Bank of China – recently witnessed a bump in their shares.

This comes courtesy of Central Huijin Investment, a subsidiary of China’s mammoth sovereign fund, China Investment Corp, which upped its stake in these banks by roughly $65 million.

While there’s word that this trend might continue over the coming half year, don’t be too quick to label it a show of strength.

Prior to the looming property crisis, these major banks expanded their loan portfolios toward households, retracting from companies in an effort to stabilize their revenue stream.

But without the safety net of Beijing, they’ve borne the brunt of the home market’s downturn, grappling with homeowners turning their backs on mortgages and a cascade of bad loans from floundering developers.

While the recent financial bolstering might instill fleeting confidence among investors, it’s time we brace for the possibility that the property crisis may just be the tip of the iceberg.

Echoes from the Past, Warnings for the Future

For those with a sharp memory, this isn’t the first time China’s sovereign wealth fund has come to the rescue. Roll the clock back eight years, post the 2015 equity market meltdown, and you’d see a similar scene.

The Shanghai Composite index had plummeted over 40%, and an effort to boost the shares of the largest banks proved futile, with declines continuing well into 2016.

Now, the pieces are eerily falling in a familiar pattern. Despite the fiscal injection, consumption across the nation stays in the doldrums, hampering the growth prospects for lenders.

Banks are now tied to developers who were once bastions of financial health – think Country Garden Holdings. If industry analysts are to be believed, we could see non-performing loans surging, potentially constituting up to 15% of those allocated to developers.

Yet, what’s even more alarming is that the current quality of bank assets might not yet depict the full spectrum of the impending crisis. This isn’t the first time the sovereign wealth fund has stepped in during rocky economic times; their intervention was also evident in the midst of the 2008 financial debacle.

China’s recent move isn’t just a random act of financial reshuffling. It’s a stark reminder and possibly an early sign, that the escalating default rates within the property sector could destabilize the entire market.

To naively consider these moves as isolated or merely strategic would be an oversight. The banking sector’s precarious state, combined with an already fragile real estate market, might just be the underpinnings of a significant economic challenge for China.

The world needs to keep a vigilant eye. Because when an economic giant like China stumbles, the tremors are bound to be felt far and wide.