China promises effective fiscal spending for growth in 2026 | World

The announcement, made after an end-of-year political meeting, suggests a fgap in better coordination between budgetary and financial instrumentsinstead of more forceful stimulus measures.

“More proactive fiscal policy will be reflected not only in the scale of funding but, more importantly, in improving the efficiency and effectiveness of how funds are used,” said the Minister of Finance Lan Fo’anaccording to information from the official Xinhua news agency.

The move highlights the fine line Beijing walks between protecting the economy from external headwinds and preventing a domestic debt crisis from destabilizing the financial system.

Lan promised to accelerate efforts to address risks associated with hidden local debt, loans provided off-balance sheet by investment vehicles on behalf of cities and provinces, which have faced difficulty repaying them.

China must step up its budgetary support for the economy, long crisis in the real estate sector and trade tensions are weighing on demand, while the room for monetary easing is shrinking. Faced with growing debt risks, Beijing is seeking to increase the government’s return on investment and direct resources to national priority areas.

Part of the strategy is to invest more in “new productive forces,” according to the official statement, a policy term referring to advanced manufacturing and technological innovation. The government also plans to simplify tax incentives and subsidies to curb inefficient competition between provinces and create a more unified domestic market.

“The meeting focused on better targeted and more effective fiscal policy, rather than just broadening the scope, focusing not on increasing spending but on improving the way it is used,” he said. Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered.

The emphasis on accuracy comes as China’s total public debt has soared in recent years to spur growth amid weak business and consumer confidence.

The government has increased its planned budget deficit to almost 10% of gross domestic product (GDP) this year, although actual spending has consistently fallen short of targets. In the first 11 months of 2025, the government spent only 34 trillion yuan (equivalent to $4.8 trillion), or less than 81% of its annual budget.

Looking ahead to 2026, Ding expects the government to increase real spending, even if the formal budget increases only slightly.

As trade tensions threaten to slow exports, a key pillar of China’s plan to boost growth is targeting support to Chinese consumers. The Finance Ministry reiterated calls for domestic demand to be the “driving force” of growth, promising to increase family incomes and maintain a national consumer goods exchange program.