Group 1: Fiscal Revenue and Taxation - In January-February 2025, national general public budget revenue was CNY 4.4 trillion, a year-on-year decrease of 1.6%[6] - Tax revenue decreased by 3.9%, while non-tax revenue increased by 11%[7] - Personal income tax grew by 26.7%, contributing 2 percentage points to fiscal revenue, primarily due to a low base in 2024[7] - Corporate income tax fell by 10.4%, dragging down fiscal revenue by 2.4 percentage points, indicating ongoing challenges in corporate profitability recovery[7] Group 2: Fiscal Expenditure and Investment - National general public budget expenditure reached CNY 4.5 trillion, a year-on-year increase of 3.4%[6] - Social security, education, and health spending accounted for approximately 43.1% of total expenditure, up 0.8 percentage points from the previous year[7] - Infrastructure-related spending decreased by 5.6% year-on-year, contributing to a 1.2 percentage point drag on overall fiscal expenditure[7] Group 3: Land Sales and Government Funds - Government fund revenue was CNY 0.6 trillion, down 10.7% year-on-year, with land transfer revenue declining by 15.7%[7] - The pace of government fund expenditure was slower than in previous years, with a cumulative completion rate of 10.2%[7] Group 4: Fiscal Challenges and Future Outlook - The broad fiscal revenue and expenditure growth rates were -2.9% and 2.9%, respectively, falling short of the annual budget targets of 0.2% and 9.3%[7] - The government plans to issue CNY 5.66 trillion in deficits for 2025, with a broad deficit rate projected at approximately 8.4%[7] - Future fiscal policies may need to be adjusted to address ongoing revenue pressures and support economic stability[7]

Core Viewpoint - The liquidity gap in March is expected to narrow significantly compared to February, indicating a potential marginal improvement in the funding environment, contingent on the central bank's stance and policy direction during the Two Sessions [1][4]. Group 1: March Liquidity Gap Observations - The overall net financing from government bonds in March is projected to be approximately 1,100 billion [2]. - The expected fiscal revenue and expenditure gap for March is around -1,200 billion [2]. - Excluding MLF and reverse repos, the liquidity gap is anticipated to decrease significantly from February, suggesting a potential marginal improvement in the funding situation [2][4]. Group 2: Bank Liability Pressure - There is considerable pressure on banks' liabilities, particularly due to the outflow of long-term funds, which cannot be fully resolved through market behavior alone and requires regulatory support [3]. - The cautious approach of the central bank in monetary policy may lead to a release of easing signals if the Two Sessions effectively boost market confidence and alleviate the rapid decline in long-term bond rates [3]. - Conversely, if the economic recovery does not show significant pressure, the central bank's focus may remain on stabilizing the exchange rate and preventing risks [3]. Group 3: Future Outlook - The liquidity situation in March will largely depend on the central bank's attitude, especially considering that fiscal expenditures typically occur at the end of the month and the ongoing pressure on bank liabilities [4]. - Continuous observation and tracking of the policy direction from the Two Sessions and the central bank's monetary policy usage in March are essential [4].