Actions speak louder than words, according to analysts, who are querying recent signals from the mainland banking watchdog, the China Banking Regulatory Commission.
They said the CBRC had been toughening its rhetoric with banks on one hand, while giving them more freedom when dealing with local government debt matters on the other.
For example, Chinese banks were told yesterday that a one-off extension of maturities for local government debt for a maximum of five years was allowed, according to the Economic Information Daily newspaper.
The paper also said the banks must give regulators a fresh assessment of their local government loan exposure by the end of next month.
'If banks are found rolling over such loans repeatedly, they will be severely punished,' the paper reported, citing a loan officer at a state bank.
China's 2008 stimulus programme in the wake of the global financial crisis saddled local governments with 10.7 trillion yuan (HK$13.2 billion) in debt, of which more than half is due over the next three years.