"The way that WMPs are sold in China has led many buyers to believe that these products are essentially term deposits. As a result, if financial institutions decide to pass on some of the default losses to these buyers, they may stop buying en masse, essentially generating a 'bank' run in the shadow-banking sector," the BofAML analysts, led by David Cui, write in their research.

Indeed, there are some early signs of this dynamic at play already, with at least one bank reportedly taking money raised from WMPs to cover a defaulting bond, according to BofAML. The repeated use of such tactics may well represent a breaking of an implicit promise embedded in the products, they warn.

"For years, bond buyers believed that bonds issued by any government-related entity, including SOEs and [local government financing vehicles], were bullet-proof," the BofAML analysts conclude

"If this perceived 'implicit' guarantee is broken, at a minimum, credit spreads would widen sharply and, at the worst, panic selling could develop, generating a negative spiral.