Economists see CNY 393bn y/y deficit shortfall in April-May as temporary, with budget room allowing accelerated spending to support growth.
China’s fiscal spending lagged in the first five months of 2026, with general public budget spending rising just 0.8% y/y against a 4.4% annual target. Government funds spending fell 4.3% y/y, pressured by a near-20% decline in land sale revenues.
The broad fiscal deficit shrank CNY 393bn y/y in April-May, reversing a CNY 258bn expansion in Q1. Revenues grew faster than planned, but spending delays weighed on Q2 GDP growth, which is expected to dip below 4.5% y/y.
Analysts expect authorities to accelerate budget execution in H2, utilizing remaining deficit room to bolster domestic demand. Full implementation of the March-approved budget could reverse the spending slowdown.