Fiscal Account Book at Year Start: Front-loaded Expenditures Drive Significant Growth in Infrastructure and Public Welfare Spending

Financial Department data shows that from January to February, the national general public budget revenue was 4.4154 trillion yuan, a year-on-year increase of 0.7%, and general public budget expenditure was 4.6706 trillion yuan, a year-on-year increase of 3.6%.

Analysts point out that the growth rate of fiscal revenue and expenditure in the first two months of this year roughly aligns with the economic data at the beginning of the year. On one hand, revenue has recovered slightly, with general public budget revenue growing modestly compared to the same period last year; on the other hand, spending has been strong, with obvious front-loaded efforts.

“Consistent with the economic data at the start of the year, there is a clear divergence in fiscal revenue in January and February. Supported by factors such as strong exports and rising prices, corporate-related taxes performed better than those from residents; on the expenditure side, there was a noticeable acceleration, with clear front-loaded fiscal efforts, and growth in infrastructure and social welfare-related spending has increased,” said Xiong Yuan, Chief Economist at Guosheng Securities, to Jiemian News.

He stated that a “good start” for the economy in the first quarter of this year is expected, but the pattern of “strong supply and weak demand” still exists, especially with weak performance in real estate and consumption. Going forward, the focus of fiscal policy remains on implementation and accelerating the rollout of existing policies to quickly generate tangible results.

In terms of revenue, the tax revenue in the first two months was 3.6393 trillion yuan, a slight increase of 0.1% year-on-year. Looking at major tax categories, domestic VAT increased by 4.7% year-on-year, 3.6 percentage points higher than the same period last year. VAT is levied based on the value added during production and operation processes and is highly related to industrial added value, which grew rapidly in January-February, up 6.3% compared to the same period last year. Corporate income tax decreased by 3.9% year-on-year, with the decline narrowing by 6.5 percentage points from the same period last year. Xiong Yuan pointed out that this is mainly due to marginal improvements in prices and profit margins, which boosted corporate profitability; domestic consumption tax fell by 6.2% year-on-year, mainly due to the drag from major components like petroleum products and automobiles; personal income tax decreased by 6.9% year-on-year, related to the high base effect from last year’s Chinese New Year offset by the timing mismatch.

Additionally, taxes related to capital markets and specific industries performed well, especially securities transaction stamp duty and vehicle purchase tax, which grew by 110% and 11.5% respectively in the first two months. Real estate-related taxes were generally sluggish, with land value-added tax down 8.2% year-on-year and deed tax down 11.1%.

“Both domestic consumption tax and income tax declined, indicating that the foundation for consumption recovery is still not solid, and industrial enterprise profits are still in the process of recovery, with some industries still under pressure. The overall sluggishness in real estate taxes and the need for further policy support to restore market confidence and revive trading activity,” said Hou Huan, Analyst at Guotai Haitong Securities.

Notably, non-tax revenue increased by 3.4% year-on-year in January-February, marking the first positive growth since April 2025.

Zhang Di, Chief Macro Analyst at China Galaxy Securities, told Jiemian News that the government work report this year emphasizes increasing fiscal resources and budget coordination, and raising the proportion of state-owned capital returns. The positive growth in non-tax revenue in the first two months may be partly related to increased dividends from state-owned enterprises and partly to local governments’ continued efforts to activate assets, both supporting non-tax revenue.

In the first two months, general public budget revenue accounted for 20% of the annual budget, roughly the same as last year. In contrast, expenditure progress reached 15.6%, 0.4 percentage points faster than the same period last year, reflecting the policy orientation of front-loaded fiscal efforts.

In terms of allocation, spending is tilted toward social welfare and infrastructure investment. Social welfare expenditure increased by 5.9% year-on-year, higher than last year’s 5.4%, with social security and employment, and health and wellness expenditures rising by 8.6% and 17.3%, respectively, while education, culture, tourism, sports, and media declined by 2.1% and 1.4%. Infrastructure spending increased by 2.4% year-on-year, compared to a decrease of 5.6% last year, with energy conservation and environmental protection, and urban and rural community expenditures rising by 5.4% and 7.7%, while agriculture, forestry, water, and transportation expenditures declined by 1.9% and 1.5%.

The Ministry of Finance’s second report—the government fund budget—shows that in January-February, revenue was 536.3 billion yuan, down 16% year-on-year. Among these, local government land transfer income was 354.7 billion yuan, down 25.2% year-on-year, with the decline widening by 10.5 percentage points from December last year.

Zhang Di pointed out that the continued decline in land transfer income in January-February corresponds with an 11.1% year-on-year decrease in real estate investment. Additionally, according to CRIC Real Estate Research data, in February, land transaction area and value decreased by 21% and 29% year-on-year, respectively, with land market activity continuing to contract across regions.

Recently, the Ministry of Finance released reports on the implementation of the 2025 central and local budgets and the 2026 draft budgets, after a comprehensive review of last year’s fiscal operations and key tax policies, to guide fiscal policy this year.

Wen Bin, Chief Economist and Director of the Research Institute at China Minsheng Bank, analyzed to Jiemian News that overall, this year’s fiscal policy continues the “more proactive” tone, focusing on “increasing total volume, optimizing structure, improving efficiency, and strengthening momentum,” to ensure a good start for the “14th Five-Year Plan.”

He further explained that the total scale of general fiscal expenditure this year is 41.88 trillion yuan, an increase of 1.85 trillion yuan over last year’s actual expenditure; the general deficit is 11.89 trillion yuan, up 300 billion yuan from last year’s budget. Structurally, efforts will continue to optimize expenditure and debt structure—more funds will be used to boost consumption, invest in people and social security, and increase central debt share and transfer payments to local governments to ease local debt pressures. To improve efficiency, measures include: timely and appropriate policy implementation, strengthening execution, emphasizing policy evaluation and accountability; enhancing fiscal and financial coordination by establishing a 100 billion yuan fiscal-financial synergy fund to stimulate domestic demand; and strengthening full-process management of special bonds, refining the “negative list” for bond projects, and adjusting the scope of self-review pilot projects for special bonds.

Additionally, Wen Bin noted that to enhance local autonomous financial capacity, the Ministry of Finance proposes reforms such as promoting local additional taxes, improving a comprehensive and classified personal income tax system, and optimizing transfer payment structures. However, the reform of consumption tax emphasizes “adjusting and optimizing the scope and rates of taxation and advancing the shift of some collection links,” without reiterating “downward transfer to local,” indicating that this year’s reform focus is on improving tax system design and administration first.