China’s finance ministry has signalled another year of aggressive fiscal support for 2026, pledging to “continue a more proactive fiscal policy” as the country enters the first year of its next five‑year plan. The ministry’s wrap‑up of 2025 and the policy outlook for 2026 underline a two‑track approach: sustain demand through consumption and targeted investment while tightening debt governance and deepening fiscal reforms.
Beijing says it will expand the fiscal “toolbox” rather than simply raise headline spending. In 2025 the government kept spending intensity high—general public budget outlays reached roughly RMB 28.7 trillion—while deploying large bond measures: ultra‑long special sovereign bonds, RMB 1.3 trillion of super‑long debt, and another RMB 4.4 trillion in newly issued local government special bonds to finance more than 48,000 projects. The ministry also issued RMB 500 billion in special bonds to recapitalise major state banks and completed a RMB 2 trillion swap of legacy local hidden debt.
Demand‑side measures were notable and deliberately consumer‑facing. The state extended trade‑in subsidies for cars and appliances, broadened loan interest‑subsidy schemes for households and service firms and ran pilots to cultivate new consumption scenarios and an internationalised retail environment. Tax and customs moves — including lower temporary import tariffs and a reduced threshold for duty‑free refunds for departing tourists — were aimed at drawing inward consumption and stabilising trade.
On the supply side, fiscal policy prioritises high‑tech and green transitions. Central science spending rose, and authorities have reorganised how central R&D funds are allocated to strengthen basic research, national strategic projects and regional innovation hubs. Government investment, guided by special bonds and central budgetary transfers, is geared to manufacturing upgrades, digital transformation pilots, and clean energy infrastructure.
Debt management and fiscal governance sit alongside expansion as an explicit objective. The ministry emphasised stricter control of “implicit” local government borrowing, full‑cycle management of debt swaps and tighter project scrutiny for special bonds, including “self‑review and issuance” pilots to improve project quality. Zero‑based budgeting pilots, a bigger role for budget performance metrics and more exacting fiscal supervision aim to raise the efficiency of public spending.
For international observers the package is familiar: a substantial, targeted fiscal loosening designed to shore up growth, support priorities such as technology and rural revitalisation, and lean on bond finance rather than recurrent deficits. Beijing’s mix attempts to reconcile short‑term stabilisation with longer‑term structural goals — but its success will depend on execution at the local level, the appetite of banks and insurers to lend into productive projects, and the credibility of measures to contain hidden debt.
The global implications are pragmatic rather than dramatic. A modest expansion in Chinese domestic demand and targeted investment in green and high‑tech sectors should support imports of intermediate goods and commodities, benefiting suppliers across Asia and beyond. At the same time, continued reliance on bond financing for local projects keeps watchpoints open: slower implementation, weak project selection or renewed recourse to off‑balance borrowing would re‑ignite concerns about local fiscal sustainability and financial stress.
The finance ministry frames 2026 as a year to do more of the same but smarter: expand the fiscal “pie,” optimise bond instruments, raise the effectiveness of transfers to local governments, and sharpen spending toward employment, consumption, technology and ecological transition. For investors and policymakers, the key questions are whether these measures will reignite private investment and consumption enough to lift trend growth, and whether Beijing can keep fiscal risks — particularly at the local level — genuinely under control.