As China’s economy slows and defaults rise, bad loan managers are quietly buying toxic debt so it does not poison the broader financial system, the Financial Times reports. Yet questions remain about whether these bad banks are savvy investors in distressed assets or conduits for a backdoor bailout of state banks. Investors widely suspect that the banks’ practice of “extend and pretend” explains why the country’s official non-performing loan ratio remains modest at 1.67 per cent. Total assets at the big four state-owned asset management companies surged from Rmb345bn to Rmb1.73tn between 2011 and 2014. Most is concentrated in industries such as steel, coal and real estate.