Report Summary 1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report The economic repair momentum is weakening, and incremental policies are urgently needed. The latest economic data shows that the economic growth momentum continues to slow down, with fixed - asset investment, manufacturing, and infrastructure investment declining, and real - estate investment still having double - digit declines. Consumption repair is unstable, and deflation pressure persists. The economic fundamentals are still weak, and incremental policies need to be quickly implemented to address multiple constraints such as investment, consumption, and debt resolution risks [6][34]. 3. Summary by Directory 3.1 Fiscal Revenue Growth Improves Continuously, Tax Revenue Increases Slightly - General public budget revenue growth rate continues to rise, with local fiscal revenue being the main contributor and the drag from central fiscal revenue weakening. From January to August, the year - on - year growth rate of general public budget revenue reached 0.3%, 0.2 percentage points higher than the previous value, exceeding the annual budget target by 0.1%. The central fiscal revenue has been improving, with the decline narrowing for 6 consecutive months, while local fiscal revenue has maintained positive growth. However, the revenue completion progress is slow [12]. - Tax revenue turns to a slight increase, and non - tax revenue continues to shrink. From January to August, the cumulative growth rate of tax revenue turned positive to 0.02%, rising for 6 consecutive months. Securities trading stamp duty contributes significantly, while consumption tax, real - estate tax, and foreign - trade tax are still drags. The growth rate of non - tax revenue dropped to 1.5%, declining for 6 consecutive months [17]. 3.2 Fiscal Expenditure Growth Declines, Infrastructure Expenditure Growth Declines Significantly - Fiscal expenditure growth has declined across the board, with both central and local expenditures hitting new lows this year. From January to August, the year - on - year growth rate of general public budget expenditure was 3.1%, with the increase narrowing by 0.3 percentage points. The expenditure rhythm is the lowest in the same period in the past five years. The growth rate of central expenditure is still relatively high but has declined by 0.8 percentage points from the previous month, while local expenditure growth has declined for 4 consecutive months, mainly affected by factors such as the decline in land transfer income [22]. - In terms of expenditure structure, people's livelihood expenditure has slowed down from a high level, and infrastructure expenditure has shrunk significantly. The growth rate of social security and employment expenditure has slightly increased, while the growth rates of education and health - care expenditure have slightly decreased. The growth rate declines of infrastructure - related expenditures such as agriculture, forestry, and water affairs and urban - rural community affairs have expanded [26]. 3.3 Government - Fund Revenue and Expenditure Growth Slows, Special Bond Issuance Speeds Up but Remains Slow - Government - fund revenue and expenditure growth is weak. The revenue side is under continuous pressure, with the year - on - year growth rate of government - fund revenue from January to August being - 1.4%, and the decline expanding. The expenditure side growth rate has marginally declined. The revenue growth rate is significantly lower than the expenditure growth rate, and the "mismatch" between revenue and expenditure progress highlights the debt - resolution pressure [28]. - Local government special bond issuance has accelerated but remains slow. From January to August, the completion progress of new special bonds was about 74.2%, an increase of about 11 percentage points from the previous value, but still 15 percentage points lower than the average in the same period from 2022 - 2024. The slow issuance is mainly restricted by debt resolution and tightened access to projects [28]. 3.4 Incremental Policies Are Approaching The economic repair momentum is weakening, and incremental policies are urgently needed to be stepped up. The economic growth momentum continues to slow down, consumption repair is unstable, and the economic fundamentals are still weak. Incremental policies need to be quickly implemented to address multiple constraints [6][34].

Revenue and Expenditure Trends - Cumulative public fiscal revenue from January to August increased by 0.3% year-on-year, up from 0.1%[1] - Cumulative public fiscal expenditure for the same period rose by 3.1%, slightly down from 3.4%[1] - Government fund revenue decreased by 1.4% year-on-year, compared to a previous decline of 0.7%[1] - Government fund expenditure surged by 30.0%, down from 31.7%[1] Monthly Financial Data - In August, public fiscal revenue reached 1.24 trillion yuan, while expenditure was 1.86 trillion yuan[1] - Government fund revenue for August was 0.33 trillion yuan, with expenditures at 0.83 trillion yuan[1] Fiscal Structure Insights - From January to August, public fiscal expenditure totaled 179,324 billion yuan, with central government spending accounting for 14.8% (up 8.0% year-on-year) and local government spending at 85.2% (up 2.3% year-on-year)[2] - Social security and employment expenditures increased by 10.0% year-on-year, while environmental protection spending rose by 6.6%[2] Revenue Composition - Total public fiscal revenue for January to August was 148,198 billion yuan, with central revenue at 43.4% (down 1.7% year-on-year) and local revenue at 56.6% (up 1.8% year-on-year)[3] - Tax revenue constituted 81.7% of total revenue, with a year-on-year change of 0.0%[3] Investment Recommendations - The stabilization of corporate income tax revenue, which turned positive year-on-year, is seen as beneficial for fiscal policy continuity and stability[4]

Group 1: Fiscal Revenue Insights - The growth rate of general public budget revenue turned positive, with a year-on-year increase of 0.1% from January to July, ending the negative growth trend observed earlier in the year[4] - In July, the monthly growth rate reached 2.6%, the highest for the year, with both central and local revenue growth hitting new highs[4] - Major tax categories, including corporate income tax, domestic value-added tax, personal income tax, and consumption tax, contributed 94% to the revenue growth, indicating a structural improvement in revenue sources[4][25] Group 2: Fiscal Expenditure Trends - General public budget expenditure grew by 3.4% year-on-year from January to July, maintaining stability but showing significant divergence between central and local expenditures[5] - Central expenditure increased by 8.8%, while local expenditure growth fell to 2.5%, the lowest for the year, reflecting challenges in local fiscal management[5] - Social security and health expenditures showed strong growth, with social security spending increasing by 9.8% and health spending by 5.3%, while infrastructure-related expenditures remained weak[38] Group 3: Government Fund Performance - Government fund revenue saw a year-on-year decline of 0.7%, but the rate of decline improved, primarily due to better land transfer income[5] - Land transfer income decreased by 4.6%, indicating ongoing weakness in the real estate market, while government fund expenditure surged by 31.7%[5] - The issuance of special bonds by local governments accelerated, with completion rates reaching 63.1% of the annual quota, a 14 percentage point increase from previous values[5] Group 4: Policy Outlook and Risks - Future fiscal policies will focus on accelerating existing policies and enhancing new tools to stimulate economic growth, as indicated by recent government meetings[6] - Despite improvements in fiscal revenue and expenditure structures, challenges remain, particularly in meeting budget completion rates and addressing weaknesses in real estate-related tax revenues[6][7]

Revenue Analysis - In the first seven months of 2025, the national general public budget revenue reached CNY 135,839 billion, with a year-on-year growth of 0.1%[3] - Tax revenue showed a narrowing decline, with individual income tax increasing by 8.8%, significantly higher than the overall tax growth rate[3] - Non-tax revenue growth slowed down compared to the previous months, indicating challenges in asset management by local governments[3] Expenditure Analysis - Public fiscal expenditure for the same period was CNY 160,737 billion, reflecting a year-on-year increase of 3.4%[4] - Social security and employment expenditures grew by 9.8%, highlighting a focus on livelihood over infrastructure[4] - Infrastructure spending continued to decline, with negative growth in urban and rural community investments[4] Government Fund Performance - Government fund revenue decreased by 0.7%, while expenditures surged by 31.7%, primarily due to accelerated disbursement of special bonds[5] - The overall broad fiscal expenditure (public fiscal expenditure + government fund expenditure) increased by 9.3% year-on-year[5] Fiscal Progress - By July 2025, the national general public budget revenue completion rate was 61.8%, below the five-year average of 63.5%[3] - Public fiscal expenditure completion rate stood at 54.1%, also lower than the five-year average of 54.7%[4] Risk Factors - Economic environment changes could significantly impact tax revenue bases, while unexpected policy changes may alter fiscal expenditure patterns[6]

Revenue Insights - From January to July 2025, the national general public budget revenue reached CNY 135,839 billion, with a year-on-year growth of 0.1%[2] - The national general public budget expenditure was CNY 160,737 billion, showing a year-on-year increase of 3.4%[2] - Individual income tax revenue growth expanded to 8.8%, significantly higher than the overall tax revenue growth rate[2] Fund Budget Analysis - Government fund budget revenue decreased by 0.7% year-on-year, while expenditure surged by 31.7%[4] - The increase in fund expenditure is primarily due to the accelerated implementation of special national bonds and local special bonds[4] - The overall fiscal expenditure (public finance + government fund expenditure) grew by 9.3% year-on-year, reflecting a 0.4 percentage point increase from the previous month[4] Expenditure Trends - Public finance expenditure growth remained stable, with a focus on social welfare, which saw a 6.8% increase, particularly in social security and employment sectors, which grew by 9.8%[3] - Infrastructure spending continued to show negative growth, with specific sectors like urban community and transportation also experiencing declines[3] - Debt interest payments increased by 6.4%, indicating a rising trend in this area[3] Fiscal Performance Metrics - By the end of July 2025, the completion rate of the national general public budget revenue was 61.8%, below the five-year average of 63.5%[2] - The completion rate for public finance expenditure was 54.1%, also lower than the five-year average of 54.7%[3]

Revenue and Expenditure Trends - In the first seven months of 2025, the cumulative year-on-year growth rate of general public budget revenue was +0.1%, up from -0.3% in the previous period[1] - General public budget expenditure maintained a year-on-year growth rate of +3.4%, unchanged from the previous period[1] - Government fund budget revenue showed a cumulative year-on-year decline of -0.7%, improving from -2.4% previously[1] - Government fund budget expenditure increased significantly by +31.7%, compared to +30.0% in the previous period[1] Tax Revenue Insights - In July, tax revenue increased by +5.0% year-on-year, marking an improvement for two consecutive months[3] - The four major tax categories showed varied performance, with domestic consumption tax growing by +5.38% and corporate income tax rising by +6.36%[4] - Personal income tax saw a notable increase of +13.92%, the highest among major tax categories, driven by low base effects and stock market gains[5] Government Fund Performance - Government fund budget revenue growth slowed to +8.9% in July, down from +20.8% the previous month, with land use rights revenue increasing by +7.2%[22] - Government fund budget expenditure growth also decreased to +42.4% from +79.2% in the previous month, with land-related expenditures declining by -4.1%[22] Infrastructure Investment and Economic Outlook - Infrastructure-related expenditure showed a recovery with a year-on-year growth rate of -3.81%, improving by 4.99 percentage points from the previous month[14] - The cumulative completion rate for general public budget revenue in the first seven months was 58.2%, lower than the average of the past five years[14] - The government is expected to have room for further fiscal policy adjustments to stabilize the domestic economy in the second half of the year[34]

Revenue Analysis - In the first half of 2025, the national general public budget revenue was 1,155.66 billion yuan, a year-on-year decrease of 0.3%[2] - The national general public budget expenditure was 1,412.71 billion yuan, showing a year-on-year increase of 3.4%[2] - Government fund budget revenue was 194.42 billion yuan, down 2.4% year-on-year[2] Expenditure Insights - Government fund budget expenditure reached 462.73 billion yuan, marking a significant year-on-year increase of 30%[2] - Public finance expenditure growth slowed to 3.4%, with a notable focus on social welfare and technology sectors[3] - Social security and employment expenditures grew by 9.2%, indicating strong support for public welfare[3] Structural Changes - The expenditure structure emphasized "people's livelihood" and "technology," while infrastructure spending continued to decline, with a negative growth rate of 4.5%[3] - The overall broad fiscal expenditure (public finance expenditure + government fund expenditure) increased by 8.9% year-on-year[4] Performance Metrics - The completion rate of the national general public budget revenue for the first half of 2025 was 52.6%, lower than the average of the past five years (53.9%) [3] - The completion rate of public finance expenditure was 47.6%, also below the five-year average of 48.1%[3] Risk Factors - Economic environment changes could significantly impact tax revenue bases[5] - Unexpected policy changes may alter the scale and pace of fiscal expenditures[5]

Revenue Performance - In June, the national general public budget revenue was CNY 18,943 billion, a year-on-year decline of 0.3%[2] - Tax revenue showed marginal improvement, growing by 1% year-on-year, while non-tax revenue decreased by 3.7%[2] - Corporate income tax and consumption tax saw marginal increases, with corporate income tax benefiting from a low base effect[2] Expenditure Trends - Public fiscal expenditure in June was CNY 28,318 billion, growing by only 0.4% year-on-year, down from 2.6% in the previous month[3] - Cumulative expenditure growth for the first half of the year was 3.4%, below the annual target of 4%[3] - Expenditure on science and technology increased by 18%, while infrastructure spending continued to decline, with transportation spending down by 13%[3] Government Fund Dynamics - Government fund revenue in June was CNY 3,959 billion, a year-on-year increase of 20.8%, marking a significant recovery[4] - Land sales revenue rose by 22% year-on-year, contributing to the improved government fund revenue[4] - Government fund expenditure surged by 79% year-on-year in June, driven by accelerated issuance of special bonds[5] Fiscal Deficit Insights - The broad fiscal deficit has widened, but the gap between actual revenue and budgeted revenue has narrowed effectively[6] - The potential fiscal gap for the year is estimated to be no more than CNY 3,000 billion if current revenue growth is maintained[6] - There is a risk of further widening fiscal gaps if revenue growth does not sustain the levels seen in the first half of the year[7]

Revenue Insights - In May, the national general public budget revenue was CNY 16,007 billion, showing a year-on-year growth of only 0.13%, a decline of 1.76 percentage points from the previous value[3] - Cumulative public budget revenue from January to May decreased by 0.3% year-on-year, maintaining a similar decline as the previous value[3] - Tax revenue growth faced obstacles, with a year-on-year increase of only 0.6% in May, down from 1.9% previously, leading to a cumulative decline of 1.6% year-on-year[3] Expenditure Trends - Public budget expenditure in May reached CNY 19,372 billion, growing by 2.6% year-on-year, a slowdown from the previous 5.8%[4] - Cumulative expenditure growth from January to May was 4.2%, still above the annual target growth rate[4] - Science and technology expenditure surged by 20% year-on-year, while infrastructure spending showed a decline, with agricultural and community affairs down by 11.5% and 8.4% respectively[4] Fund Revenue and Expenditure - Government fund revenue in May was CNY 2,897 billion, a decrease of 8.2% year-on-year, marking a significant drop of 16 percentage points from the previous value[5] - Government fund expenditure grew by 8.8% year-on-year in May, although this was a decrease from the previous month's growth of 45%[5] - By the end of May, government fund expenditure progress was approximately 25.7% of the annual target, still higher than the same period in 2024[5] Economic Outlook - The marginal slowdown in fiscal revenue and expenditure suggests a focus on technology, consumption, and livelihood support, with expectations for continued stable issuance of government bonds in the third quarter[6] - Potential economic pressures due to tariff disturbances may lead to further fiscal stimulus, likely through new policy financial tools[6]