China’s cabinet has restricted the amount of new debt local governments can take on and the projects they can start with state funding in 12 highly indebted regions.

Only specific projects, including those endorsed by the national government, will be permitted, while other projects like power plants and train terminals will not be approved.

The State Council has issued a directive stating that local government finance vehicles’ debt growth should not exceed the provincial corporate sector’s average loan growth rates.

The measures aim to balance funding for infrastructure projects while mitigating local government debt risks.