MNI: China's Fiscal Expansion Needs Decrease As 5% GDP Eyed

The need for Beijing to deploy additional large-scale stimulus such as extra special treasuries this year is fading as the economy stays on track to meet its 5% growth target under current fiscal settings, though advisors told MNI further Q4 measures may still be deployed to secure 2026 momentum.

Gong Liutang, director of the Institute for Advanced Study at Wuhan University, said calls for an additional CNY1 trillion in special treasuries are unnecessary for now given sufficient fiscal resources. As of July, about 54% of the annual budget had been spent, roughly the same pace as last year, while fiscal revenue reversed earlier declines to rise 0.1% y/y in the first seven months, driven by July’s 5% tax revenue increase, he added. The stock market rally should also further lift corporate income and consumer confidence, he continued, noting stamp duty revenue from stock trading rose 62.5% y/y in January-July. (See MNI: China Stocks To Test Higher Levels, Drive Confidence)

“Policy intensity will not be reduced in the second half, as fresh measures to address the marginal slowdown in July consumption and investment will be introduced soon,” said Gong. He cited the anticipated rollout of policy-based financial instruments to support infrastructure investment and the Ministry of Commerce’s pledge to boost service consumption in September. (See MNI: Beijing Preps Policy-based Bonds Aimed At Infrastructure)

Analysts at Huachuang Securities estimated that fiscal spending growth in H2 that directly drives the economy will reach 4.1-6.7% even without extraordinary measures, compared with 4.5% in H1. That range is broadly in line with the 4.7-4.8% growth needed in H2 to secure Beijing’s annual 5% target, the analysts noted. 

Zhang Yiqun, director at a fiscal studies institute under Jilin province’s finance department, said fiscal revenue may also continue to improve in the coming months, partly due to stronger tax collection, reducing the need for major fiscal expansion, at least until the end of Q3. On top of H1’s 5.3% GDP growth, Zhang expects the economy to remain steady in Q3 amid peak investment and holiday consumption. 

He also pointed to the China-U.S. tariff truce until mid-November, which could trigger front-loaded exports, and to continued efforts by major cities to stabilise the housing market and advance urban renewal. “First three quarters’ growth should ensure the achievement of the annual target,” Zhang said. (See MNI: China's Major Cities To Ease Home Sale Rules Further) 

2026 GROWTH OUTLOOK

Both Zhang and Gong highlighted the possibility of additional measures in Q4 to support a strong start to China’s next Five-Year Plan (2026–2030), with policy direction likely to become clearer after the Party’s Fourth Plenary Session in October. Zhang suggested next year’s bond quota could be front-loaded to finance early infrastructure projects, a traditional approach preferable to extraordinary measures that could signal economic weakness.

Gong added authorities could launch major projects early under the new plan and the central government could also borrow further, including greater issuance of foreign debt through Hong Kong.

Another advisor said the sharp fall in land sales has eroded fiscal revenue, and could drive additional special treasuries of as much as CNY1 trillion in Q4, on top of the CNY1.3 trillion already allocated. The structure could mirror 2023, with CNY500 billion used this year for major infrastructure and consumer subsidies for spending on services, while the remainder is carried into 2026.