An interesting China Daily report the gist of which goes basically: A local government applies for a loan claiming it will use the money for high-speed rail (!) it doesn't. Instead it uses it to pay off debt.

Bear in mind, this happened in 2008. It's just now coming to light. It may just be an isolated case and not matters a whole lot, but on the other hand, this could also be one of the many hundreds/thousands similar cases.

Anyway, as Shih has pointed out, local government (who are dependent on a property bubble for finances) may have debts totaling $1.6 trillion. Of course daddy Beijing's huge reserves can still take care of this if/when they need a bailout. But it would be interesting to see how far can that sugar daddy's $$$ go when other bubbles blow up.