China’s Finance Ministry is investigating possible irregularities in the ways several local governments have obtained loans, as part of wider efforts to keep borrowing in check and avoid widespread defaults. According to a notice seen by the South China Morning Post, the ministry last month asked provincial governments in Inner Mongolia, Shandong, Henan, Chongqing and Sichuan to address the irregularities. The notice was copied to the Ministry of Commerce and the China Banking Regulatory Commission, asking the two bodies to pay special attention to the institutions involved. Local governments have racked up sizeable debt, often via financial vehicles, to back massive infrastructure or public projects that have little chance of eventually generating cash flows to repay the loans. To tackle the problem, the central government has been bailing out local governments by swapping debt for long-term, low-interest bonds, converting RMB 8.1tn last year.