Chinese Premier Li Keqiang’s plan to introduce deposit insurance is meant to comfort the nation’s savers as bad loans mount. In the bond market, it’s fueling speculation he’s preparing to let some banks collapse, Bloomberg News reported. Authorities may tolerate failures of smaller banks once depositor safeguards are in place, Kwong Li, chief executive officer of China Lianhe Credit Rating Co. said.

Facing a growing problem of debt defaults, the Chinese government should deploy 100 billion to 200 billion yuan ($16 billion to $32 billion) this year to help restructure indebted companies, a former adviser to the central bank said Thursday, The Wall Street Journal reported. "In the second half of the year, the government should promote debt restructuring in certain sectors," economist Li Daokui said at a news briefing, adding that the funds should be taken from the budget.

China's biggest airline by revenue warned it expects to report a first-quarter net loss, the first sign that the recent weakening of the nation's currency is impacting a major industry, The Wall Street Journal reported. China Southern Airlines Co. said late Tuesday it will likely post a net loss of between 300 million yuan ($48.2 million) and 350 million yuan for the quarter through March due to foreign exchange losses. In the same quarter last year, it posted a net profit of 57 million yuan.

In the past two months, China has suffered its first domestic bond default in recent history and a series of small bankruptcies that have some investors fretting the country could face its very own “Lehman moment”, the Financial Times reported. But behind the lurid headlines and fear of financial panic, something more complicated is happening. These systemically insignificant financial failures are being hyped up by China’s state-controlled media – and then unwittingly amplified by the international press – as part of a campaign of government-sanctioned “Potemkin defaults”.

China’s banking regulator ordered owners of the nation’s 68 trust companies to be prepared to provide funding or sell their stakes as the risk of defaults rises in the $1.9 trillion industry for high-yield investment. The China Banking Regulatory Commission told trust companies to either restrict their businesses and reduce net assets or have shareholders replenish capital when the firms suffer losses, according to an April 8 notice that was seen by Bloomberg News.

Chinese importers have defaulted on at least 500,000 tonnes of U.S. and Brazilian soybean cargoes worth around $300 million, the biggest in a decade, as buyers struggle to get credit amid losses in processing beans. Three companies in the eastern province of Shandong had defaulted on payments for shipments as they were unable to open letters of credit with banks, trade sources said on Thursday. A string of defaults on loans, bonds and shadow banking products in recent weeks has highlighted rising credit risks in China, partly fuelled by signs the economy is slowing.

A small manufacturer of polyester yarn based in China's wealthy Zhejiang province has declared bankruptcy, threatening its ability to meet an interest payment on a high-yield bond due in July, Reuters reported. Zhejiang Huatesi Polymer Technical Co Ltd asked a local court for bankruptcy protection in early March, according to an announcement on the website of the Anji County People's Court. The firm sold 60 million yuan ($9.7 million) in bonds in a private placement in January 2013 at an interest rate of 11 percent.

Chinese banks are stuck in a lose-lose legal battle between domestic shipyards and foreign buyers over billions of dollars in refund guarantees that are supposed to be paid out if shipbuilders fail to deliver on time, Reuters reported in an insight. One in three ships ordered from Chinese builders was behind schedule in 2013, according to data from Clarksons Research, a UK-based shipping intelligence firm. Although that was an improvement from 36 percent a year earlier, it was well behind rival South Korea, where shipyards routinely delivered ahead of schedule the same year.

Shanghai Chaori Solar Energy Science & Technology Co., the first Chinese company to default on corporate bonds onshore, said a bondholder is seeking to force it into bankruptcy restructuring, Bloomberg Businessweek reported. The manufacturer received a letter on April 3 from Shanghai Yihua Metal Materials Ltd. saying the creditor had submitted a petition to Shanghai No. 1 Intermediate People’s Court, according a filing by Chaori to the Shenzhen Stock Exchange yesterday. Chaori said it doesn’t know whether the court will accept the case and whether the restructuring will proceed.

China's government, concerned that the economy is faltering, said it would target more spending to boost growth, but it left unanswered a question over whether monetary policy will be eased as well, The Wall Street Journal reported. China's State Council, the government's executive body, unveiled Wednesday a combination of spending moves to rev up China's economic engine. They include additional spending on railways, upgraded housing for low-income households and tax relief for struggling small businesses.