China: Deficit miss seen supporting growth – Standard Chartered

Standard Chartered economists Hunter Chan, Shuang Ding and Carol Liao note that China’s broad fiscal deficit reached 8.1% of GDP in 2025, below target but still expansionary. They expect a broad deficit of 8.5% of GDP in 2026, partly funded by unused 2025 resources, with fiscal support directed to key Five-Year Plan projects and consumption.

Under-implemented 2025 budget aids 2026

"China under-implemented its budget deficit for another year in 2025, with spending undershooting the target more than revenue."

"The broad budget (covering the general public budget and government funds budget) registered a deficit of 8.1% of GDP, 0.9ppt below the approved target, albeit higher than the 7.2% recorded in 2024, providing a positive fiscal impulse that supported growth last year."

"We expect policy makers to slightly lower the 2026 official deficit ratio (based on the official definition) to 3.8% of GDP in March from 4.0% in 2025, mainly on a likely lower growth target."

"Unused funds from 2025 could be used to finance the revenue-spending gap, which is likely to be larger than the official deficit."

"We forecast the 2026 broad budget deficit at 8.5% of GDP, slightly higher than the actual broad deficit in 2025, indicating room for fiscal expansion to support growth if the budget is fully implemented."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)