China’s finance ministry unveiled a package of six fiscal and financial measures on January 20 aimed at resuscitating domestic demand by lowering financing costs for private firms and subsidising consumer credit. The measures, announced at a State Council press briefing, sit alongside a pledge that next year’s deficit, public-debt and spending envelopes will remain “necessary” and that budget outlays will be sustained or expanded in priority areas such as household income support, social services and technology R&D.
The centerpiece of the package is support for private-sector investment: four of the six measures target business financing through interest-rate subsidies, expanded guarantee limits and risk-sharing for bond issuance. Subsidies of 1.5 percentage points for a range of loans—covering SMEs, equipment upgrades and selected industrial chains—are offered for up to two years, while a new special guarantee programme doubles the per-firm guarantee cap to RMB20 million and raises the state fund’s risk-sharing ratio to as much as 40 percent.
On the consumption side, Beijing broadened and prolonged interest-subsidy schemes for personal consumption loans and service-sector operating loans. Consumer loans used for any form of consumption, including credit-card instalments, qualify for a 1 percentage point subsidy; single-loan subsidy caps have risen from RMB500 to RMB3,000 for consumers, and the list of eligible spending now includes digital, green and retail purchases alongside traditional categories such as travel and health.
These measures complement a more expansive fiscal stance that Beijing has already adopted. In 2025 China ran a deficit ratio of roughly 4 percent and issued an unusually large RMB11.86 trillion of new government debt; Beijing also deployed RMB1.3 trillion of ultra-long special sovereign bonds last year and earmarked RMB300 billion for trade-in subsidies that are estimated to have pulled roughly RMB2.6 trillion of related sales.
Officials framed the 2026 approach as not only bigger but smarter: zero-based budgeting, stricter performance management and pruning of low-value spending are intended to free up funds for “investing in people,” propping up incomes and making public money more effective. Fiscal incentives will be coordinated with monetary policy—especially bank lending flows—to try to accelerate the transmission of support into real investment and purchases in the first quarter.
The package also contains supply-side and industrial-policy changes. The finance ministry said it will cancel export tax rebates on photovoltaic and phosphorous-chemical products from April 1, 2026, and phase out battery product rebates over two years. Beijing presents this as part of a green transition and industrial upgrading, and it signals a move to curb wasteful, emission-heavy export activity.
At the same time the ministry reiterated commitments to subsidy transparency and rule enforcement, promising to clean up irregular local fiscal subsidies and to better report central and provincial support to the WTO. Officials emphasised that China’s competitive edge comes from firms’ own investment in R&D and entrepreneurship rather than from indiscriminate subsidies.
The package includes a heavier tilt toward technology self-reliance: more central spending on basic and applied research, continued use of government investment funds to back early-stage “hard tech,” fiscal interest subsidies for innovation loans, and tax measures favouring manufacturing and tech firms. These elements reflect a continuing priority to support strategic sectors even while trying to revive consumption and smaller businesses.
The measures are pragmatic and targeted, but they are not a panacea. Subsidised borrowing and enhanced guarantees can lower the price and increase the supply of credit quickly, yet they also raise contingent fiscal liabilities and may not by themselves overcome weak demand or investor confidence. Implementation rests on the capacity and incentives of local governments and banks, and the scale and duration of support will determine whether the stimulus translates into sustained private investment and consumer spending.