All 31 Chinese Provinces Report Stable H1 Local Government Finances

All 31 provinces, autonomous regions, and municipalities across China have released their first-half (H1) 2026 financial reports, revealing stable local government fiscal operations and overall economic resilience. Local general public budget revenue reached 6.88 trillion yuan (approximately $960 billion), up 2.7% year-on-year, with the growth rate improving by 0.6 percentage points compared to the first quarter, according to Xinhua News.

Broad-Based Revenue Growth

Of the 31 provincial-level regions, 28 reported revenue growth in H1—three more than in the first quarter. All four major economic regions—East, Central, West, and Northeast—saw revenue increases, signaling balanced growth across the country.

Guangdong, Jiangsu, and Zhejiang continued to lead in revenue scale, with Guangdong’s local general public budget revenue reaching 742.1 billion yuan, up 2.8% year-on-year, according to China.com. Jiangsu and Zhejiang each surpassed 500 billion yuan in H1 revenue.

Jiangsu’s performance illustrates the broader trend: the province’s general public budget revenue reached 594.1 billion yuan, with tax revenue of 454.5 billion yuan (up 3.4%) and a tax-to-revenue ratio of 76.5%. Value-added tax grew 5.8%, corporate income tax rose 2.5%, and individual income tax surged 17.4%, reflecting strengthening business activity and employment conditions.

In terms of growth rates, Tibet (+36.9%), Xinjiang (+10%), and Gansu (+8.2%) led the nation, with western regions showing particularly strong momentum.

Expenditure Focuses on Livelihood

Local general public budget expenditure reached 12.2111 trillion yuan in H1, up 0.6% year-on-year. Guangdong, Sichuan, and Jiangsu recorded the largest expenditure scales. Notably, livelihood spending remained a priority across provinces—Guangdong’s livelihood expenditures accounted for approximately three-quarters of its local general public budget spending, while Jiangsu and Zhejiang saw social security and employment spending grow over 7%, and Shandong’s health spending rose 14.6%.

However, expenditure growth lagged revenue growth, a pattern that experts attribute to several factors. Wang Zhenyu, dean of Liaoning University’s Local Fiscal Research Institute, noted that insufficient treasury fund guarantees at some levels and local implementation of “tight budget” policies may explain the gap, as First Financial reported. Zhu Qing, a professor at Renmin University’s Fiscal and Tax Research Institute, cited spending cuts in response to “tight budget” calls and a lack of investment projects with adequate returns as contributing factors.

Central Support and Fiscal Balance

The central government has arranged 10.42 trillion yuan in transfer payments to local governments this year, maintaining the level above 10 trillion yuan for four consecutive years. Equalizing transfer payments reached 2.83 trillion yuan, up 3.7% from last year, according to China Economic Net.

Addressing concerns about fiscal self-sufficiency rates, Tang Zaifu, deputy director of the Ministry of Finance’s Budget Department, clarified that a rate below 100% is normal under China’s budget system. “Since local general public budget revenue is only one of the sources of expenditure, a fiscal self-sufficiency rate below 100% is the norm,” Tang said. “Although local fiscal self-sufficiency rates are below 100%, the central government has increased transfer payments to local governments, and local finances can achieve balance.”

Special Bond Issuance Accelerates

China has set a new local government debt quota of 5.2 trillion yuan for 2026, including 4.4 trillion yuan in special-purpose bonds, with issuance progress reaching 47% in H1. Funds are primarily directed toward municipal and industrial park infrastructure, transportation, urban renewal, and social programs. Over 170 billion yuan has been used as project capital, leveraging additional investment.

This year, Hebei, Jiangxi, Hubei, and Chongqing were added to the “self-review/self-issuance” pilot program for special bonds, giving local governments more autonomy in approving and issuing debt. The Ministry of Finance will continue strengthening closed-loop management of special bond borrowing, use, and repayment, according to Zhao Zeyong, deputy director of the MOF’s Debt Management Department.

Outlook for H2

While land sale revenue declined sharply—state-owned land use rights transfer income fell 31.5% to 977.8 billion yuan in H1, reflecting the ongoing real estate market adjustment—the overall fiscal picture remains stable. National fiscal data released by the Ministry of Finance shows H1 general public budget revenue of 12.1 trillion yuan, up 4.7%.

Looking ahead, Luo Zhiheng, chief economist at Yuekai Securities, expects local fiscal expenditure growth to rebound in H2 as major infrastructure projects and “six networks” planning are implemented. The combination of stable revenue growth, robust central transfer payments, and accelerating special bond issuance suggests China’s local governments are well-positioned to maintain fiscal stability through the remainder of 2026.