> The Chinese govt gave the money to local authorities to spend.

I believe that is a overly-simplistic, "net" explanation.

I think it goes more like:

    1. China's central bank grants credit (i.e. cheap loans) to big "national" banks
    2. Big national banks grant credit to regional/provincial/municipal governments
    3. Local governments spend on infrastructure (build it and they will come)
    4. No one comes
    5. ...
    6. Profit?

So the big banks have bad loans on their books, but the national government / central bank will surely bail them out.