Beijing has signalled a stepped-up fiscal effort for 2026, promising that overall public spending will “only rise, not fall” while stressing a shift toward more efficient, targeted outlays. At a State Council press briefing, Vice Finance Minister Liao Min set out a four‑point formula for next year — bigger totals, a leaner structure, higher returns and stronger growth momentum — and sought to reassure markets that the expansion will be managed within sustainable debt limits.
The announcement builds on an already aggressive 2025 fiscal package. Last year China raised its general government deficit ratio to about 4 percent of GDP and issued roughly 11.86 trillion yuan (about $1.7 trillion) of new government debt, an increase of 2.9 trillion yuan versus the previous year. Beijing argues these steps were calibrated to support near‑term demand, underpin livelihoods and accelerate structural transformation, while leaving China’s overall government debt ratio well below the G20 average.
Policy detail is pragmatic and broad. The finance ministry said it issued 1.3 trillion yuan (roughly $185 billion) of ultra‑long special sovereign bonds in 2025 to back what it calls the “two heavy, two new” agenda and to subsidise large‑scale consumption measures, including a 300 billion yuan trade‑in subsidy scheme that it estimates helped generate about 2.6 trillion yuan in related sales. Measures to stimulate consumption also included loan interest subsidies for personal consumption and service‑sector operators, tweaks to duty‑free and outbound refund schemes, and pilots for new retail formats.
Debt management remains a central strand of the narrative. Beijing continues to swap and consolidate local hidden liabilities: it allocated 2 trillion yuan for swapping stock implicit debts and authorised 800 billion yuan of new special bonds to replenish local government funds used in the process. The ministry said these swaps have cut the average interest cost on local borrowings by more than 2.5 percentage points, easing fiscal pressures and gradually reducing municipal debt risks as reforms take hold.
Support for enterprise innovation and private firms sits alongside consumption stimulus. The ministry described new loan interest subsidies aimed at small and micro enterprises, focused on 14 priority industrial chains such as new energy, automobiles, industrial robots and medical equipment. Central funds have also been ring‑fenced to share risk on bond issuance by private companies and private equity firms, providing partial credit support to encourage market financing.
There are also signs of supply‑side fiscal discipline. From April 1, 2026, export tax rebates for photovoltaic products will be cancelled and rebates for electronic products will be phased out over two years, a move officials say will curb wasteful competition among regions and promote rational resource allocation. The ministry reiterated that technological competitiveness should come from persistent R&D and entrepreneurship rather than subsidy dependence, and it has created an inter‑agency taskforce to clamp down on irregular local subsidies.
For households, measures are modest but politically significant: central transfers funded roughly 1.2 trillion yuan of pension subsidies in 2025, the ministry raised retirees’ basic pensions by about 2 percent and boosted the national minimum urban and rural basic pension by 20 yuan per month. Agricultural risk management is also getting attention, with a directive slated for 2026 to deepen agricultural insurance and better stabilise farm incomes — part of a broader aim to bolster food security and rural revitalisation.
Taken together the package reflects a careful balancing act. Beijing is widening the fiscal envelope to support demand and structural upgrading, while tightening the mechanics of spending through zero‑base budgeting, clearer central‑local fiscal responsibilities, tax reform and better monitoring of subsidy practices. The immediate effect should be to buttress growth and ease financing strains for both local governments and private firms; the long‑term challenge will be ensuring that larger spending translates into higher‑quality investment and sustainable public finances.
What to watch in the months ahead are the precise 2026 budget numbers, the implementation of the ultra‑long sovereign bond programme, the pace and transparency of local debt swaps, and whether consumption stimulus — especially the trade‑in and subsidy schemes — continues to produce measurable increases in household spending. The cancellation of export rebates will also be a bellwether for the government’s willingness to reshape incentives that have long underpinned export‑oriented industrial policy.