In most countries, the revelation that local governments would default on a fifth of their bank loans would be greeted with alarm. In China, however, the news came as a pleasant surprise.

“The fact that nearly 80 per cent of those projects have at least some capacity to service their debt is quite amazing,” said Qu Hongbin, chief China economist at HSBC.

Analysts said that their working assumption had been that a minimum of 30 per cent of the total Rmb7,700bn ($1,100bn, €875m, ￡732m) bank lending to Chinese local governments was unlikely to be repaid. That made the 20 per cent estimate relatively good news, even if it was only a preliminary figure provided by the banks themselves before a more formal assessment by the banking regulator this year.