China’s Fiscal Stability Supports Economic Growth Momentum
China’s fiscal operations continued to run smoothly in the first half of 2026, with general public budget revenue reaching 12.1 trillion yuan (approximately $1.7 trillion), up 4.7% year-on-year, according to data released by the Ministry of Finance. The steady fiscal performance provides strong support for the country’s economic recovery and growth, with cumulative revenue growth improving month by month throughout the period.
Revenue Recovery Reflects Economic Resilience
National tax revenue reached 9.79 trillion yuan in H1, up 5.3% year-on-year — 3.1 percentage points higher than first-quarter growth. Non-tax revenue grew 2.3% to 2.32 trillion yuan. The improving trend accelerated notably in June, when monthly fiscal revenue grew 8.7% year-on-year and tax revenue surged 10.8%, the highest monthly growth of the year, as Caixin reported.
Ma Hongbing, deputy director general of the Treasury Department at the Ministry of Finance, attributed the revenue growth to China’s strong economic resilience and vitality. “In the first half of the year, the economy continued its overall stable, new-oriented, and quality-improving development trend,” he said at a July 22 press conference. “At the same time, rising prices, active stock markets, and strong foreign trade growth also provided strong support for fiscal revenue growth.”
Key tax categories showed broad-based strength. Domestic VAT grew 6%, corporate income tax rose 3.9%, and personal income tax increased 13.1%. Import goods VAT and consumption tax grew 11.8%, while securities transaction stamp tax surged 97.3% on the back of active stock market trading.
Li Xuhong, vice president and professor at the Beijing National Accounting Institute, noted that the tax data reflects improving economic fundamentals. “Domestic VAT and corporate income tax grew 6% and 3.9% respectively, reflecting the continued recovery in production, operations, and corporate profitability,” she said. “Personal income tax and import-related taxes grew relatively fast, reflecting improved resident income, import trade, and domestic demand activity.”
Broad-Based Growth Across Regions
Regional fiscal performance was notably strong, with all four major regions — East, Central, West, and Northeast — recording revenue growth. Among China’s 31 provinces, 28 reported revenue increases in H1, three more than in the first quarter. Local general public budget revenue reached 6.88 trillion yuan, up 2.7% year-on-year, while central government revenue grew 7.5% to 5.22 trillion yuan.
The Economic Daily reported that the fiscal data demonstrates the effectiveness of China’s proactive fiscal policy in supporting economic recovery. H1 GDP grew 4.7% year-on-year, within the annual target range of 4.5%-5%, marking a solid start to the 15th Five-Year Plan period (2026-2030).
Expenditure Prioritizes Livelihood and Key Sectors
National general public budget expenditure reached 14.33 trillion yuan in H1, up 1.5% year-on-year, with spending front-loaded to support economic activity. Health expenditure grew 10.8%, social security and employment spending rose 7.6%, and housing security expenditure increased 6.1%. Science and technology spending grew 1.3%, while education expenditure edged up 0.6%.
The government also accelerated the disbursement of central-to-local transfer payments, arranging 10.42 trillion yuan for 2026 — the fourth consecutive year above 10 trillion yuan. By the end of June, 9.4 trillion yuan (90.3% of the annual budget) had been disbursed, 0.5 percentage points faster than the same period last year.
Tang Zaifu, deputy director general of the Budget Department at the Ministry of Finance, addressed concerns about local fiscal sustainability, clarifying that fiscal self-sufficiency rates below 100% are the norm under China’s budget system. “Because local general public budget revenue is only one of the sources of expenditure, a fiscal self-sufficiency rate below 100% is the norm,” he explained. “Although local fiscal self-sufficiency rates are below 100%, the central government has increased transfer payments to localities, and local finances can achieve balance.”
Innovative Policy Tools Drive Domestic Demand
A highlight of this year’s fiscal approach has been the innovative fiscal-financial coordination package. The central government established a 100 billion yuan fiscal-financial coordination fund for domestic demand stimulus, combining loan interest subsidies, financing guarantees, and risk compensation mechanisms. As CCTV News reported, the policy package has channeled significant credit toward consumption and investment priorities.
By mid-year, new loans in related areas — including SME loans, equipment renewal loans, service sector loans, and personal consumption loans — exceeded 17 trillion yuan, up 4.6% year-on-year. The consumer trade-in program also gained momentum, with 125 billion yuan in subsidies disbursed in H1, driving approximately 1.1 trillion yuan in sales of automobiles, home appliances, and digital products.
Special bond issuance has been another key pillar. New local government special bonds of 4.4 trillion yuan were planned for 2026, with 2.07 trillion yuan issued in H1 (47% of the annual target), primarily for municipal and industrial park infrastructure, transport infrastructure, urban renewal, and social programs. The self-review and self-issuance pilot expanded to include Hebei, Jiangxi, Hubei, and Chongqing, with pilot regions issuing 1.6 trillion yuan by end of June — 77% of national issuance.
Second-Half Outlook: Accelerated Spending Ahead
Following the Central Political Bureau meeting on July 30, which emphasized implementing more proactive fiscal policy and moderately loose monetary policy, officials signaled further acceleration of fiscal measures in the second half of the year. As ifeng Finance reported, the meeting called for fully leveraging existing policy effectiveness and timely planning pragmatic incremental policies.
Yuan Chuang, chief economist at Caixin Securities, noted that fiscal funds available for the second half remain relatively ample. “Based on the annual budget targets and new special bond quotas, the H1 national general public budget expenditure progress was about 48%, and new special bond issuance progress was about 47%,” he said. “It is expected that H2 will show significant characteristics of accelerated expenditure and catch-up bond issuance, leveraging the combined effect of existing and incremental policies to support economic momentum.”
Yang Zhiyong, dean and researcher at the Chinese Academy of Fiscal Sciences, emphasized that the focus of accelerating expenditure progress in H2 will be at the local level. “The greatest room for improvement is in project expenditure, which needs to be pushed forward more forcefully,” he said. He also called for optimizing the design of special bond projects and coordinating general bonds, special bonds, special treasury bonds, and ultra-long-term special treasury bonds to form a combined force of fiscal policy.
Sun Kunpeng, deputy dean at the School of Finance and Taxation of the Central University of Finance and Economics, expressed confidence in the continued improving trend. “As the second half of the year sees China increase counter-cyclical adjustment, the improving economic trend is expected to be consolidated, continuing to support tax revenue growth,” he said.
Structural Challenges Remain
Despite the overall positive fiscal picture, structural challenges persist. National government fund budget revenue fell 21.6% to 1.52 trillion yuan, with land concession revenue declining 31.5% to 977.8 billion yuan — reflecting continued weakness in the real estate sector. As UDN noted, the RMB appreciated about 3% against the dollar in H1, supported by strong trade surpluses and improved economic fundamentals.
The 21st Century Business Herald reported that the Central Political Bureau’s emphasis on counter-cyclical adjustment and incremental policies suggests further fiscal stimulus measures may be forthcoming. The meeting also proposed advancing the construction of “six networks” — water network, new power grid, computing network, new-generation communication network, urban underground pipeline network, and logistics network — which could provide additional investment opportunities.
What to Watch
As China enters the second half of 2026, key indicators to monitor include the pace of special bond issuance, the rollout of incremental fiscal policies, and whether the improving revenue trend continues. The government’s ability to balance proactive fiscal stimulus with structural reforms — particularly in addressing real estate sector challenges and local fiscal pressures — will be critical to sustaining economic momentum. With expenditure progress at about 48% and bond issuance at about 47% by mid-year, the second half promises significant fiscal firepower to support China’s growth trajectory.