China Huachuang Securities: Fiscal Project Capital Relatively Abundant This Year, Infrastructure Project Construction Resistance May Be Smaller Than Last Year

CNFinance APP learned that recently, Huachuang Securities released a commentary report on fiscal data for January-February. From January to February, general fiscal revenue decreased by 1.4% year-on-year, with an 18.5% decline in December 2025; from January to February, general fiscal expenditure increased by 6.1%, with a 0.7% decrease in December 2025. This year’s fiscal efforts early in the year are comparable to last year, and for infrastructure, further fiscal funds that can form physical quantities are expected, with a higher growth rate—estimated at 26.3% in Q1, a new high since 2022.

The new government bonds issued this year are roughly the same as last year, and land sale income remains under pressure. However, supported by the rollover of two 500 billion policies in Q4 last year and the issuance of 800 billion in new policy-based financial instruments this year, it is estimated that the fiscal funds capable of forming physical quantities will grow by 9.7% for the full year, a new high since 2022. Additionally, it is observed that this year’s fiscal project capital is relatively abundant, and the obstacles to project commencement and construction may be less than last year.

Huachuang Securities’s main points are as follows:

From January to February, general fiscal revenue decreased by 1.4% year-on-year, with an 18.5% decline in December 2025; from January to February, general fiscal expenditure increased by 6.1%, with a 0.7% decrease in December 2025.

The high infrastructure growth at the start of the year has sparked market discussion. We explore its causes and sustainability from a fiscal perspective:

1. Fiscal Perspective on High Infrastructure Growth

(1) Overall fiscal effort at the start of the year: early efforts are comparable to last year

This year’s early fiscal efforts are on par with last year, reflected in:

1. Looking at the deficit, there is a strong subjective willingness to act early—the “double deficit” reappeared at the start of the year:

a) For nearly 30 years, this is only the second time a narrow fiscal deficit appeared at the start of the year: in January-February, a public fiscal deficit of 255.2 billion yuan was recorded (last year was the first in nearly 30 years at 124 billion yuan; from 2017 to 2024, deficits were only recorded in March (quarter-end expenditure months), with even later years).

b) The highest broad fiscal deficit at the start of the year in recent years: 1-2 months recorded a broad fiscal deficit of 1.0363 trillion yuan (last year 621.7 billion yuan). In recent years, only 2020, 2023, and 2024 recorded broad deficits in January-February, at 230.9 billion, 78.4 billion, and 311.3 billion yuan respectively; before 2018, deficits were only recorded in June.

2. Looking at expenditure, the objective effort at the start of the year is significant—January-February total (broad fiscal) expenditure growth of 6.1%, a new high since 2022 (from 2020 to 2025, January-February growth rates are: -5.2%, 3.3%, 11.9%, 2.1%, 2.7%, 2.9%).

(2) From a fiscal perspective, the reasons for high early-year infrastructure growth: dual impact of funds and projects

1. Funds: After confirming the overall fiscal effort early in the year, for infrastructure, further analysis shows that fiscal funds capable of forming physical quantities may grow even faster—estimated at 26.3% in Q1, a new high since 2022 (2020-2025 Q1 growth rates: 4.5%, -20%, 50.9%, 2.3%, -19%, 19%; including four sub-items (two main accounts revenue, one main account debt (net government bond financing + new general bonds), two main account debt (new special bonds, *no special government bond issuance at start), quasi-fiscal + remaining budgeted funds for projects), proportionally included based on their potential to form physical quantities; detailed assumptions are in the main text).

2. Projects: Both central and local governments have no shortage of projects at the start of the year.

a) Central: In December last year, the National Development and Reform Commission (NDRC) issued a list of “two major” construction projects for 2026 and a central budget investment plan totaling about 295 billion yuan; approved or approved multiple major infrastructure projects with total investments exceeding 400 billion yuan.

b) Local: In Q4 last year, two policies adding 500 billion yuan each (activation of 500 billion yuan in remaining quota, including 200 billion for major provincial projects + 500 billion in new policy-based financial instruments) corresponded to projects that can continue construction at the start of the year.

(3) From a fiscal perspective, the sustainability of high infrastructure growth throughout the year: funds are at their highest since 2022, but local project pressure remains, and further observation is needed

1. Funds: This year’s new government bonds are roughly the same as last year, and land sale income remains under pressure. However, supported by the rollover of two 500 billion policies in Q4 last year and the issuance of 800 billion in new policy-based financial instruments this year, it is estimated that the fiscal funds capable of forming physical quantities will grow by 9.7% for the full year, a new high since 2022 (2020-2025 Q1 growth rates: 21.2%, -5.2%, 17%, -8.4%, 3.8%, 3.2%; detailed assumptions are in the main text).

Moreover, it is observed that this year’s fiscal project capital is relatively abundant, and project commencement and construction may face fewer obstacles than last year: the availability of capital is a necessary condition for project initiation. Thanks to the full use of new policy-based financial instruments to supplement project capital, it is estimated that fiscal project capital will increase by 841.6 billion yuan this year, compared to a decrease of 609.1 billion yuan last year (note: fiscal project capital mainly includes central budget investment, infrastructure expenditure, “two major” special government bonds, equipment renewal bonds, special bonds as capital, land sale revenue available funds, quasi-fiscal (new policy-based financial instruments), etc.; detailed assumptions are in the main text).

2. Projects:

a) Local: Major project plans for the year are set conservatively, with significant pressure on large provinces. This year, the investment targets for major projects in three regions (6 major economic provinces, 12 heavily indebted provinces, and 13 other provinces) are set with negative growth:

Among the six major provinces, only Guangdong’s growth is set positive (5%, 2025 0%), while the other five provinces’ growth rates are flat or declining.

b) Central: The review status of projects by the NDRC remains to be observed: the total investment amount of projects reviewed (first half of this year + second half of last year) correlates well with infrastructure growth, but last year’s relationship was severely reversed, possibly due to larger local investment plans.

Additionally, ongoing observation of the “14th Five-Year Plan” infrastructure pre-emptive efforts: the “14th Five-Year Plan” infrastructure is set to be “moderately advanced,” with the number of major projects increasing from 21 in the “13th Five-Year Plan” to 23.

2. January-February Fiscal Data Review

Revenue side: Tax growth turned positive, with significant contributions from foreign trade-related taxes and price-related taxes; manufacturing and modern service industries continue to perform well.

Expenditure side: Expenditure growth turned positive for the first time since September last year, with infrastructure-related expenditure becoming a driving force.

Broad fiscal: Land sale income remains volatile month-to-month; issuance of new special bonds in advance has boosted expenditure growth.

Risk warning: Policy surprises, discrepancies between budget and implementation, difficulty tracking the use of quasi-fiscal funds, and potential underestimation or overestimation of last year’s quasi-fiscal funds’ utilization in 2025.