Last Friday we reported that the most important (and most underreported) story of the week was Bloomberg's disclosure that Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) they’ve lent to finance local government infrastructure projects, and that only 27 percent of the loans to the financing vehicles can be repaid in full by cash generated by the projects they funded. As this is a topic that deserves much more attention, we present the views of Goldman's Ning Ma on this critical issue, which when combined with Fitch's recent disclosure that the CDO market is ramping up in full force halfway across the world, and that China has 66 million vacant homes, should all come together in a nice and tidy confluent package of a combustible real estate-cum-credit explosion. Of course, this being Goldman, guess which way the spin is pointed: "We continue to believe systemic risks associated with such loans are limited. Key to watch: The results of restructuring and NPL recognition in 2H10 (mainly from unrecognized social projects and misused loans, but likely far less than 23% NPL ratios), and credit cost allocation among banks and local gov’ts." In other words, ignore the biased conclusion, but certainly focus on this most recent unravelling of the Chinese bubble.