China pledges timely fiscal support to bolster growth

Vice Finance Minister Liao Min announced that China will introduce further fiscal policy measures to support economic growth, as the world's second-largest economy is experiencing a slowdown. Liao emphasized the need to maintain the continuity and stability of macroeconomic policies while planning and allocating fiscal resources over a longer period.

He stated that a larger portion of government spending will be allocated towards households and consumption to bolster weak domestic demand. Liao also highlighted the importance of better coordination among fiscal, monetary, and industrial policies as conditions change. The authorities are currently preparing additional fiscal-financial support measures for the second half of the year, in collaboration with the central bank and regulators to enhance overall policy coordination. Specific details regarding these measures were not disclosed.

China has already taken steps to stimulate domestic demand by expanding loan interest subsidies for small private firms and consumers. The finance ministry announced that the scheme will provide a 1 percentage point interest subsidy on eligible small-business loans for up to two years and extend the subsidy to credit-card installment products, with higher subsidy caps.

At China's July Politburo meeting, leaders committed to supporting the slowing economy by accelerating fiscal spending on previously budgeted infrastructure projects for the rest of the year. China's target budget deficit for 2026 is around 4% of GDP, and the government aims to speed up bond issuance to bolster growth. The central bank recently affirmed that it will maintain a loose monetary stance and implement practical and effective measures as required, without explicitly stating a rate cut or a reduction in the bank reserve-requirement ratio.

Liao further mentioned that China will intensify fiscal and tax reforms, enhance the budget management system, and establish a clearer framework for central-local fiscal relations. This would involve clearly defined responsibilities and a more balanced regional development approach. Preventing local governments from accruing new hidden debt remains a top priority, he added, stressing that fiscal risks, particularly in local government debt, should be steadily reduced.