When the current crop of Chinese leaders assumed power, they wasted no time in ordering an extensive audit of local government debt.
Presumably the new team, led by President Xi Jinping, wanted to know what everyone else wants to know: How has China's massive expansion of credit since 2008 affected state finances?
The uncomfortable truth is that nobody has a great handle on exactly how much local governments have spent.
The bean counters are still working overtime in the provinces to get Beijing an answer on local debt levels, with a report likely due by the end of the year. But in the meantime, the warnings from some private forecasters are getting downright scary.
Fitch -- which has been among the most dour -- published a report Wednesday that argues any talk of deleveraging is premature. Credit is still growing, the ratings agency said, with much of the expansion occurring in channels that are not reflected in official statistics.
"Local governments continue to accrue debt as more infrastructure projects are undertaken to bolster growth. Much of this may ultimately be fiscalised by the central government, resulting in limited capital impairment at the banks. Yet any exposure that is non-cash-generating on a daily basis reduces banks' operating cash inflows and tightens liquidity. It is these liquidity challenges that make local debt a near- as well as long-term issue."
It's not just local governments that have spent. China's credit boom has also saddled unworthy businesses with large loans and fueled the country's shadow banking system.
In the end, will Beijing be able to simply write a check to cover any bad debt? Fitch said it won't be that easy.
"The Chinese authorities' greater control over borrowers and lenders, and a solid policy record – combined with a largely domestically funded financial sector and closed capital account – arguably make such high leverage more wieldy than elsewhere. Yet no financial system can sustain rising leverage indefinitely. Eventually, swelling debt burdens will constrain economic activity as greater resources are directed into debt-servicing and further investment exacerbates overcapacity, in turn squeezing corporate revenues."