FX168 Financial News Agency (Asia-Pacific) reported that China announced it would expand government spending and optimize fund allocation methods by 2026, aiming to strike a balance between stabilizing economic growth and preventing debt risks.
The Ministry of Finance stated on Sunday (December 28) that Beijing plans to increase spending and enhance local governments' expenditure capacity through more effective transfer payments. The statement, released after the year-end policy meeting, indicates that policy priorities may lean more towards strengthening the coordination between fiscal and financial instruments rather than introducing larger-scale stimulus measures.
Xinhua News Agency quoted Minister of Finance Lan Fo'an as saying: 'A more proactive fiscal policy is not only reflected in the scale of funds but, more importantly, in improving the efficiency and effectiveness of fund utilization.'
This move highlights the delicate balance Beijing must strike between two objectives: on one hand, countering external adverse factors and supporting economic operations; on the other, avoiding a domestic debt crisis that could undermine financial system stability.
Lan Fo'an stated that efforts will be accelerated to resolve the risks associated with local 'hidden debts.' Hidden debts refer to off-balance-sheet borrowings by local governments through financing vehicles such as urban investment platforms, which some cities and provinces have struggled to repay.
Currently, China needs to increase fiscal support for the economy. A multi-year downturn in the real estate sector and trade tensions are weighing on demand, while room for monetary easing is narrowing. Against the backdrop of rising debt risks, Beijing is seeking to enhance governmentReturn on Investmentresource allocation and guide resources towards national priority areas.
The statement noted that part of the policy involves increasing investment in 'new quality productivity'—a term referring to advanced manufacturing and technological innovation. The government also plans to streamline tax cuts and fiscal subsidies to curb inefficient competition among provinces and promote the development of a more unified domestic market.
Ding Shuang, Chief Economist for Greater China and North Asia at Standard Chartered Bank, said: 'The emphasis of the meeting is on more targeted fiscal policies and higher effectiveness, rather than simply pursuing scale. The focus is not on significantly increasing spending but on improving the efficiency of fund utilization.'
In recent years, to stabilize growth amid weak business and consumer confidence, China's total government debt has surged significantly, and the shift towards 'precision' policies is related to this trend.
This year, the government raised its broad fiscal deficit target to nearly 10% of GDP, but actual spending has consistently fallen short of the set targets. In the first 11 months of 2025, government expenditure amounted to approximately 34 trillion yuan (about 4.8 trillion US dollars), accounting for less than 81% of the annual budget.
Looking ahead to 2026, Ding Shuang expects the government to expand the scale of actual expenditures, even though the formal budget increase may only see a modest rise.
As trade frictions could weigh on exports — which have been one of the key pillars for stabilizing China's economic growth — Beijing plans to shift more support towards household consumption. The Ministry of Finance reiterated its aim to make domestic demand a 'driving force' for growth and pledged to raise household incomes while continuing the nationwide consumer goods 'trade-in' program.
The program, which provides subsidies for energy-efficient home appliances and electric vehicles, has been one of the few bright spots in this year’s retail data. By extending such initiatives, Beijing hopes to stabilize consumption; however, household spending remains persistently weak amid falling property prices and a cooling labor market.
