(Yicai) Aug. 5 -- China's northeastern Inner Mongolia Autonomous Region has regained its investment and financing freedom after becoming the first to exit the list of 12 heavily indebted Chinese regions, with the country continuing to promote local governments to mitigate debt risks.

Inner Mongolia will further strengthen government debt management, consolidate the results of exiting from the list of regions with local debt risk, and guide local cities and counties to continue to promote debt resolution, its legislative body said in a review report on the 2024 financial accounts.

The debt pressure of local governments in China has continued to increase amid unfavorable factors such as the Covid-19 pandemic and the downturn in the domestic real estate market.

In January last year, China's cabinet issued a new regulation to limit new state-funded projects in regions with high debt risk and prevent them from taking on new debt. Inner Mongolia, the municipalities of Chongqing and Tianjin, Liaoning, Jilin, Heilongjiang, Guizhou, Yunnan, Gansu, and Qinghai provinces, as well as Guangxi Zhuang Autonomous Region and Ningxia Hui Autonomous Region, were added to a list of such regions.

Local governments on the list face many investment and financing restrictions, with local private investments also affected, so many of them have been actively resolving debt risks and striving to exit, Wen Laicheng, a professor at the Central University of Finance and Economics, told Yicai.

Inner Mongolia made a breakthrough in debt management last year, cutting hidden debts by 67 percent, the local government said in its work report in January.

Hidden debts, or implicit debts, are taken on by local governments through their investment and financing vehicles. They are not included on local governments' balance sheets and constitute a key financial risk, with the governments having been trying to resolve such risks by directly issuing bonds to replace hidden debts.

The debt balance of Inner Mongolia was about CNY1.4 trillion (USD195 billion) as of the end of last year, with CNY1.2 trillion worth of government bonds and CNY240.4 billion (USD33.5 billion) of local investment firms debts, meaning that the region's hidden debts accounted for less than 20 percent of its total, according to statistics from Huachuang Securities.

Ningxia has also met the conditions to exit the list, Sun Zhi, director of the regional Department of Finance, said in March. It has applied to the State Council for the withdrawal and is expecting to do so this year, Sun noted.

Editors: Dou Shicong, Martin Kadiev