context: The fiscal package in the 2026 Government Work Report suggests Beijing is using budget policy less to lift headline growth than to manage the constraints now shaping the economy. With property still weak, local fiscal capacity under strain and private demand recovering unevenly, the priority is not simply to spend more, but to use central fiscal resources to stabilise the parts of the system least able to carry the adjustment. This points to a broader shift in the role of fiscal policy, from boosting expansion at the margin to underwriting the conditions for a more controlled transition.
The 2026 fiscal package is best read as a rollover of last year’s strong support with a clearer shift in priorities and burden-sharing
- overall support remains high, but extra easing is limited
- main indicators broadly unchanged from 2025
- 4 percent deficit ratio
- C¥1.3 tn in ultra-long special treasury bonds
- C¥4.4 tn in local government special bonds
- broad deficit ratio of 8.1 percent is roughly in line with 2025 and still well above 2023 and 2024
- this suggests Beijing is balancing economic stabilisation with fiscal sustainability, notes Luo Zhiheng 罗志恒 Yuekai Securities chief economis
- the increase in new government bond issuance is only about C¥30 bn once hidden debt swap bonds are included
- this looks restrained and leaves room for later action if needed, Yuan Haixia 袁海霞 Chengxin International Research Institute president says
- main indicators broadly unchanged from 2025
- fiscal resources are being redirected towards consumption, livelihoods and policy transmission
- the central government has set aside C¥100 bn for fiscal-financial coordination measures to support domestic demand, notes Lan Fo’an 蓝佛安 Finance minister
- special bond usage priority also shifts
- more clearly towards major projects, hidden debt swaps and clearing government arrears
- moving away from property-linked stabilisation towards demand repair and balance-sheet clean-up
- fiscal activism is also being used to relieve pressure on local governments
- fiscal and tax reform should follow a logic of ‘building local revenue sources first, then providing transfers, then cutting waste’, Zhang Lin 张林 Far East Zixin Assessment chief macro researcher notes, arguing that easing local fiscal gaps should be the first priority of this year’s reform agenda
- zero-based budgeting cannot fundamentally solve local fiscal difficulties, but it is critical under today’s tight-balance conditions because it improves spending efficiency, Yuan Haixia notes