Proactive fiscal policy measures: Fiscal expenditure reaches 30 trillion yuan for the first time, with continuous optimization of the debt structure

China Times (www.chinatimes.net.cn) Reporter Zhang Zhi Two Sessions Report

2026 marks the beginning of the “14th Five-Year Plan,” drawing significant attention to policy tone and strength. Amid international uncertainties, this year, China will continue to implement more proactive fiscal policies.

On March 5th, the Fourth Session of the 14th National People’s Congress opened at the Great Hall of the People, with Premier Li Qiang delivering the government work report.

The report states that this year’s deficit ratio is planned around 4%, with a deficit of 5.89 trillion yuan, an increase of 230 billion yuan from last year; general public budget expenditure will reach 30 trillion yuan for the first time, up about 1.27 trillion yuan from last year, a 4.4% increase; national government fund budget expenditure will be 11.8663 trillion yuan, a 5.1% increase; a plan to issue 1.3 trillion yuan in ultra-long-term special government bonds to support “dual” construction, “two new” initiatives, and other projects.

Qin Rongsheng, a member of the Chinese People’s Political Consultative Conference and professor at Beijing National Accounting Institute, told China Times that the continued increase in fiscal力度 demonstrates a firm stance on countercyclical regulation. Notably, maintaining a deficit ratio of 4% for the second consecutive year, even without a sharp economic downturn, is highly strategic.

“From the perspective of the deficit ratio, maintaining at 4% indicates that China’s fiscal policy has completely shed the long-standing ‘3% red line’ psychological constraint and entered a new phase of ‘functional finance.’ The government explicitly states that fiscal expenditure will ‘only increase and not decrease,’ showing a willingness to承担更多债务责任 to support the economy amid weak effective demand and subdued social expectations,” Qin Rongsheng said.

“With existing policies supporting, the necessity for large-scale new policies this year is reduced, and overall力度 remains稳健. The broad fiscal expenditure growth rate is 4.6%, slightly higher than last year’s 3.7%, reflecting a moderate expansion stance,” said Jiang Liqin, partner and head of China Client & Business Development at KPMG, interpreting the report.

More Precise Policies

On the fiscal policy front, the deficit ratio remains around 4%, consistent with last year, maintaining a relatively high level.

“As the start of the ‘14th Five-Year Plan,’ a high deficit not only aims to address cyclical fluctuations but also provides sufficient ‘ammunition’ for key transformations over the next five years, supporting technological independence, industrial chain security, and other long-term strategies,” Qin Rongsheng explained.

It is noteworthy that maintaining a high deficit ratio implies a large influx of new financial resources. Combined with 1.3 trillion yuan in ultra-long-term special government bonds and 4.4 trillion yuan in local government专项债, the broad fiscal expenditure scale in 2026 will reach new heights. These funds will focus on “dual” and “two new” projects, directly creating tangible work and driving effective investment.

He believes that maintaining a high deficit and moderate growth essentially exchanges short-term debt expansion for a window of time for economic transformation. By maintaining a certain growth rate, the denominator can be enlarged, gradually diluting existing debt risks and avoiding a hard economic landing that could trigger systemic risks.

However, the funds from high deficits are not “floodgates” but are precisely channeled through tools like special bonds and专项债 into areas such as AI, quantum科技, biotech manufacturing, and民生短板 like affordable housing and urban village renovations. Qin Rongsheng said this “ample total volume and optimized structure” aims to create new demand through supply-side upgrades.

Not only the deficit.

In terms of policy focus, the government work report clearly states the need to strengthen countercyclical and cross-cycle regulation, balancing short-term growth stabilization with long-term economic restructuring goals.

Meanwhile, the report proposes improving the efficiency of fiscal funds and enhancing the consistency and effectiveness of macro policies. The former indicates that this year, the government will favor new types of policy financial tools and venture capital guiding funds.

“This year, the government has首次增加额度800 billion yuan for new policy financial tools at the beginning of the year, a significant increase from last year’s 500 billion yuan. These tools are effective in mobilizing social capital, and policy effectiveness is expected to further improve. The latter indicates tighter coordination between fiscal and monetary policies,” Jiang Liqin said.

Optimizing Debt Structure

It is noteworthy that this year, growth in general public budget expenditure is substantial. The government work report states that the scale will reach 30 trillion yuan for the first time.

Jiang Liqin explained that to achieve short-term economic stability, fiscal investments in expanding infrastructure and boosting consumption will remain robust, with the scale of ultra-long-term national bonds supporting “dual” and “two new” projects reaching 1.3 trillion yuan, unchanged from last year. To facilitate medium- and long-term economic transformation, foster new growth drivers, and enhance residents’ consumption capacity, the government will further increase investments in科技创新 and民生福利. This year’s public finance budget shows that expenditures on科技 and民生 increased by 7.1% and 5.6%, respectively, both exceeding the overall fiscal expenditure growth of 4.4%. These two sectors now account for 42.8% of total expenditure, a record high.

However, according to Zhang Lin, vice president of Far East Credit Research Institute, with a deficit of 5.89 trillion yuan, plus 1.3 trillion yuan in ultra-long-term special bonds, 0.3 trillion yuan in special bonds, and 4.4 trillion yuan in new local government debt, the total新增政府债务规模 reaches 11.89 trillion yuan, only 300 billion yuan more than last year, without a significant increase.

In recent years, China has投入大量精力 in debt resolution.

To ease地方债务压力, the central government will once again承担主要举债责任 this year, with新增债务规模 reaching 6.7 trillion yuan, surpassing local governments for the second year in a row, and setting a record for transfer payments to地方.

“Under a high deficit, the central government’s leverage effectively replaces隐性债务压力 of地方 governments, optimizing debt structure and allowing local governments to focus on development and民生,” Qin Rongsheng said.

A highlight is strengthening fiscal and金融协同 to amplify政策效能. The government work report shows that this year, the government首次设立 100 billion yuan for fiscal-financial synergy to促内需, using a combination of loan interest subsidies,融资担保, and风险补偿 to support domestic demand. Jiang Liqin said that the scale and scope of structural monetary tools are also expected to be continuously optimized, with targeted coordination in areas like fiscal interest subsidies.

In Qin Rongsheng’s view, the 2026 growth target of “4.5%–5%” and the “4%” deficit ratio form a policy mix of “pragmatism, proactive progress, and a combination of short- and long-term measures.” It acknowledges the pain of economic transformation and the potential slowdown in growth, while demonstrating the central government’s firm resolve to stabilize the economy and promote转型 through strong fiscal expansion. The core logic of this arrangement is: no longer solely pursue rapid速度, but focus more on稳健 and quality of development, laying a solid foundation for China’s modernization during the “14th Five-Year Plan.”