Debt relief initiative by China's local governments secures significant victory in Inner Mongolia
Inner Mongolia, a province-level jurisdiction in China and the country's top coal miner, has successfully exited the central government's list of high-risk debt regions. This milestone was announced by the finance and economic committee of the region's People's Congress, marking the first significant victory in China's national debt relief campaign.
The autonomous region, located in the northern part of China, has been grappling with significant local government debt accumulated since the 2008 global financial crisis. Aggressive borrowing, particularly through local government financing vehicles, led to a debt buildup that became a pressing issue. This was highlighted by financial risks that forced the suspension of projects, such as a subway project in Baotou, Inner Mongolia's second-largest city.
In September 2023, the State Council issued a directive targeting 12 high-risk province-level areas, including Inner Mongolia. The directive aimed to control and restructure debt in the targeted areas over a two-year period. It also included support measures for the regions.
The directive was a response to the local government debt level, which had reached 51.95 trillion yuan (US$7.23 trillion) by mid-2025 for all local governments in China. The unsustainable borrowing models and declining fiscal revenue sources like land sales have contributed to this debt accumulation.
Inner Mongolia, known for its dairy products and renewable energy, has been making efforts to exit the high-risk debt list. The revelation of its exit from the list was made in a local budget review, discussed internally in late July and released to the public earlier this week.
The finance and economic committee of the People's Congress of Inner Mongolia issued a statement, urging the consolidation of the progress made in exiting the list of key high-debt regions and continued debt resolution efforts based on local conditions. The committee emphasized the need for continued efforts to stabilize the region's financial risks.
The debt relief campaign launched by the central government in 2024 has been instrumental in helping Inner Mongolia exit the high-risk debt list. The campaign aims to control and restructure local government debt over a two-year period, supported by relevant policy measures issued by the State Council.
This milestone in Inner Mongolia is a testament to the effectiveness of China's national debt relief campaign. It reflects progress in stabilizing the financial risks faced by local governments and paves the way for a more sustainable financial future.
[1] Source: Various news reports and official statements.
- The successful exit of Inner Mongolia from the central government's high-risk debt regions list can be attributed to the concerted efforts in the finance and industry sectors, as indicated by the debt relief campaign launched by the central government in 2024.
- The economy of Inner Mongolia, predominantly driven by industries such as dairy products, renewable energy, and business, is poised to experience a more stable financial future following its exit from the high-risk debt regions list and the ongoing debt resolution efforts.
