Economic Growth and Policy Focus - The economic growth target for 2026 is set around 5%, emphasizing the shift towards domestic demand, particularly in the areas of livelihood and consumption[2][9]. - The "14th Five-Year Plan" aims for a per capita GDP growth rate of approximately 4.4% annually, with a potential GDP growth rate of around 5% during this period[8]. Fiscal Policy and Budget - The general public budget deficit rate for 2026 is projected to be 4.2%, with a deficit scale of 6.18 trillion yuan, an increase of 520 billion yuan from 2025[3][15]. - In a more optimistic scenario, the deficit rate could rise to 4.5%, with a total deficit of 6.62 trillion yuan, reflecting an increase of 960 billion yuan[16]. Social Welfare and Consumer Support - Fiscal spending on child-rearing subsidies is expected to be between 100 billion to 120 billion yuan in 2026, alongside an expansion of free preschool education costing over 50 billion yuan[3][10]. - The increase in urban and rural residents' basic pensions is anticipated to exceed 1,000 billion yuan, with a minimum increase of 50 yuan per person[11]. Investment and Infrastructure - Effective investment will be expanded, focusing on urban renewal and basic public service construction, with an estimated 200 billion yuan allocated for urban renewal projects[4][28]. - The issuance of special bonds for equipment upgrades is expected to remain at 200 billion yuan, supporting the modernization of key industries[5][34]. Debt Management and Corporate Support - The issuance of special refinancing bonds is projected to reach 2 trillion yuan in 2026, aimed at alleviating debt pressure on local governments[35]. - The new local government special bond limit is expected to reach 5 trillion yuan, with 1.6 trillion yuan allocated for debt repayment and 2.9 trillion yuan for project construction, marking an increase of 1 trillion yuan from 2025[36].

Report Summary 1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Core Viewpoints - In July 2025, fiscal revenue improved marginally, and fiscal expenditure maintained a relatively high growth rate. However, there is a risk of a decline in fiscal expenditure in the future [1][4]. - Fiscal revenue improvement mainly came from tax revenue, with VAT and corporate income tax contributing more to tax growth. Fiscal expenditure relied more on government debt, and the broad fiscal deficit rate was at a relatively high level [2][3]. 3. Summary by Relevant Catalogs Revenue Side - **General Public Budget Revenue**: In July 2025, the monthly general public budget revenue increased by 2.65% year - on - year (previous value: - 0.3%), with tax revenue up 5.0% (previous value: 1.0%) and non - tax revenue down 12.93% (previous value: - 3.7%), showing an improved revenue structure [1][11]. - **Tax Revenue Composition**: In July, the four major taxes all performed well. Domestic VAT increased by 4.3% year - on - year, consumption tax by 5.4%, corporate income tax by 6.4%, and individual income tax by 13.9%. VAT and corporate income tax contributed more to the year - on - year tax growth. Export tax rebates decreased by 5.6% year - on - year, and real - estate - related taxes decreased by 3.8%. Vehicle purchase tax decreased by 13.8%. In June, stamp duty and securities trading stamp duty increased by 24.2% and 125.4% respectively [2][13]. - **Government Fund Revenue**: In July, government fund revenue increased by 8.9% year - on - year (previous value: 20.8%). Considering the time lag between land transactions and government fund revenue and the weak real - estate investment growth, its sustainability needs further observation [1][17]. - **Accumulated Revenue**: From January to July, the accumulated general public budget revenue increased by 0.1% year - on - year, in line with the annual budget, but the structure was poor. Tax revenue growth was - 0.3%, lower than the budgeted 3.7%, while non - tax revenue growth was 2.0%, higher than the budgeted - 14.2%. Government bond fund revenue decreased by 0.7% year - on - year, with the narrowing decline's sustainability to be observed [23]. Expenditure Side - **General Public Budget Expenditure**: In July, general public budget expenditure increased by 3.04% year - on - year (previous value: 0.38%), showing a rebound in expenditure growth [2][19]. - **Government Fund Expenditure**: In July, government fund expenditure increased by 42.4% year - on - year, maintaining a high growth rate. This may be related to the positive growth of government fund revenue in July and the accelerated issuance of new special bonds since the end of June [2][19]. - **Expenditure Structure**: In July, traditional infrastructure expenditure continued to contract, with an overall infrastructure - related fiscal expenditure growth rate of - 3.8% (previous value: - 8.8%). Expenditure on social security increased by 13.1%, health by 14.2%, and debt service by 8.9% [3][19]. - **Accumulated Expenditure**: From January to July, fiscal expenditure growth was 3.4%, slightly lower than the annual budgeted 4.4%. Government fund expenditure growth was 31.7%, higher than the budgeted 23.1%, indicating relatively front - loaded spending [23]. Fiscal Deficit - As of July, fiscal expenditure relied more on government debt, and the broad fiscal deficit rate was at a relatively high level. From January to July, the general budget fiscal deficit was 2.49 trillion yuan, a year - on - year increase of about 0.5 trillion yuan. The accumulated broad fiscal deficit was 5.61 trillion yuan, and assuming a nominal GDP growth rate of 4% this year, the current accumulated broad fiscal deficit rate was 4.0%, close to that in 2022 [3][22]. Future Outlook - There is a risk of a decline in fiscal expenditure. After August, the year - on - year increase in government bond net financing is expected to turn negative. The scale of special bonds for project expenditure in the second half of the year is also expected to decline. Without incremental fiscal policies, fiscal expenditure intensity may decrease [4][25].