China’s government spending accelerated at the fastest pace for any start to a year since 2022, as authorities move to prop up the economy amid mounting domestic and international challenges. Bloomberg calculations based on Ministry of Finance data show that broad public expenditure climbed 6% in January and February compared with a year earlier. Meanwhile, fiscal revenue fell 1.4%, leaving a combined deficit across China’s general and government fund budgets of over 1 trillion yuan ($150 billion), nearly 70% higher than in the same period last year.
The surge in public spending is part of Beijing’s strategy to offset weak consumer demand and stimulate credit growth, which the central bank’s rate cuts have so far failed to achieve. Infrastructure-related expenditure rose 2.4% year-on-year in the first two months, marking the first increase since April 2025, while outlays on education, employment, and social security jumped 6.1%, the fastest growth since August. Analysts note that these measures are aimed at supporting households and businesses without letting fiscal stimulus become reckless, as Finance Minister Lan Fo’an has emphasized the need to avoid wasteful spending amid mounting debt concerns.
Early signs suggest the stimulus is beginning to feed through into the economy. Data released earlier this week showed fixed-asset investment unexpectedly rose 1.8% in the first two months of 2026, reversing a contraction seen for the first time in 2025. Nonetheless, the economy faces multiple headwinds. Rising oil prices due to spillovers from the Iran war threaten global demand for Chinese exports, raw material costs are squeezing factory margins, and domestic weaknesses persist, including a 25% slump in government land-sale income and a 6.9% decline in individual income tax revenue—the first drop since March—reflecting slow household earnings growth.
Bloomberg notes that China’s expanded deficit and accelerated early-year spending illustrate the balancing act Beijing faces: supporting economic growth through public expenditure while containing debt risks and guarding against inefficient allocation of resources. With domestic consumption weak and global uncertainties mounting, the government’s fiscal approach will be critical to maintaining stability in the months ahead.
