If the mainland's economic growth rate slumps this year, it won't be because local government officials failed to come up with ambitious stimulus plans.
Over the last two months, province after province has outlined massive investment proposals to boost activity in the face of slowing growth.
This week Chongqing outlined a three-year plan to pump 1.5 trillion yuan (HK$1.84 trillion) into seven capital-intensive industries, including car manufacturing and electronics.
Not to be outdone, Tianjin announced plans of its own to invest 1.5 trillion yuan in a string of capital-intensive industries.
Elsewhere, Hunan's provincial capital Changsha, which already wants to build the world's tallest skyscraper, said it would invest an additional 829 billion in new infrastructure.
Guangdong announced projects worth at least 430 billion yuan. Shanxi pledged 1 trillion yuan in extra spending. And Guizhou said it would invest 3 trillion yuan in developing eco-tourism (suggesting someone has rather missed the point).
Put that lot together and you get 8.3 trillion yuan of new investment, equal to 18 per cent of the mainland's gross domestic product last year. And that's without factoring in a host of other city and provincial governments that have promised to ramp up stimulus spending without giving figures.
The plans are certainly impressive, but so far very little has been said about how all this new investment will be funded.
However, if Beijing sticks to its plan to approve no more than 150 billion yuan in local government bond issues this year, we can safely assume local officials are expecting to raise the funds they want in the form of loans from their friendly neighbourhood bank.
That's worrying. During the last round of stimulus spending in 2009 and 2010, local government-owned investment companies ran up bank debts estimated at anywhere from 10 trillion yuan to 20 trillion yuan.
Their investments succeeded in supporting the mainland's high growth rate. But, with major doubts about the economic viability of many local government projects, analysts warn a rash of delinquencies could push banks' bad loan ratios up to more than 10 per cent, from less than 2 per cent at the end of last year.
A fresh round of stimulus is only going to magnify those fears, and all the more so because the debts - and the risks - will be concentrated disproportionately in a handful of provinces that already look dangerously overheated.
A glance at last year's figures shows that the two fastest-growing provinces, with a growth rate of 16.4 per cent each, were Chongqing and Tianjin. In both cases growth was propelled by sky-high levels of local government-backed investment. In Tianjin, fixed investment made up an astonishing 70 per cent of provincial GDP in 2010, the last year for which figures are available. In Chongqing the proportion was 55 per cent (see the first chart).
Considering that government spending exceeded revenues by 30 billion yuan in Tianjin, and by more than 100 billion yuan in Chongqing, it appears much of that investment was funded by bank loans.
And many of those loans were taken out by highly indebted local government-backed investment vehicles. For example, one of Tianjin's flagship listed companies, Tianjin Teda, has a debt-to-equity ratio of 413 per cent.
As a result of this debt-fuelled investment approach to growth, Tianjin and Chongqing are already highly leveraged. Tianjin's bank-loan-to-GDP ratio was 136 per cent last year, while Chongqing's was 132 per cent, both well above the national average (see the second chart).
With both provinces now planning massive stimulus efforts, those leverage ratios are only going to climb. And the probability of a couple of nasty local debt crises is only going to increase.