Core Viewpoint - The article discusses the characteristics of the fiscal situation at the beginning of the year, highlighting a "low income" and "high deficit" environment, which may lead to a "technology stock-friendly" fiscal policy throughout the year [3][4][5]. Group 1: Low Income - The public fiscal revenue experienced a rare negative growth of -1.6% at the beginning of the year, with a budget target of 0.1% [4][12]. - The revenue from land sales continued to decline significantly by -15.7%, contributing to a double-digit drop in secondary account revenue of -10.7% [4][12]. - If the income side remains under pressure, it may force incremental policies that further elevate the "high deficit" and support "medium expenditure," reinforcing the "technology stock-friendly" fiscal approach [4][12]. Group 2: High Deficit - The public fiscal deficit recorded in January-February was 124 billion, marking the first occurrence of a narrow deficit at the start of the year in nearly 30 years [5][15]. - The broad fiscal deficit reached 621.7 billion, the highest for the same period in recent years, indicating a strong subjective willingness to stimulate the economy [5][15]. - The dual deficit pattern suggests that the fiscal policy continues to support risk appetite, reflecting an increase in local government activity since October of the previous year [6][15][17]. Group 3: Medium Expenditure - The growth rate of broad fiscal expenditure was 2.9%, slightly above the previous year's rate of 2.7%, indicating limited fiscal strength [7][21]. - Expenditure focused on technology (+10.6%) and social welfare (social security +6.7%, education +7.7%), while infrastructure spending was under pressure, with declines in community and agricultural spending [7][21]. - The budget arrangements for the year show that growth rates for technology and social welfare expenditures are significantly higher than the nominal GDP growth rate, while infrastructure growth is only around 1% [7][21]. Group 4: Debt Issuance - The issuance of deficit bonds has been rapid, indicating a fiscal preference for supporting consumption, with net financing of government bonds reaching nearly 1.5 trillion in Q1, the highest for the same period in recent years [9][22]. - In contrast, the issuance of new special bonds has been slow, suggesting that investment may be accelerated in the second quarter, with plans for significant special bond issuance already disclosed [9][23]. - The issuance of long-term special bonds is expected to start in the second quarter, potentially leading to more substantial physical investment [9][23]. Group 5: Fiscal Data Review - The fiscal revenue for January-February showed a rare negative growth of -1.6%, with significant contributions from sectors like rail and ship manufacturing, and computer technology [25][29]. - The expenditure growth rate for January-February was 3.4%, with a focus on technology and social welfare, reflecting the characteristics of the annual budget [46]. - The broad fiscal situation remains supported by a new high in deficits, with land sales continuing to be weak, indicating a challenging fiscal environment ahead [51][52].

Core Viewpoint - The article suggests that the fiscal policy for 2025 is "technology stock friendly," driven by a high deficit and moderate spending, which may positively influence technology stock valuations [2][10]. Summary by Sections 1. 2025 Budget Characteristics: "High Deficit" and "Low Income" Combined with "Moderate Spending" - The budget features a deficit rate of 4%, an increase of 1 percentage point from the previous year, marking a historical high, with a deficit scale reaching 5.66 trillion yuan, up by 1.6 trillion yuan from last year [4]. - The income growth rate for the budget is set at only 0.1%, the lowest in recent years, primarily due to tax revenue being pressured by prices and a decrease in non-tax one-time income [5]. - The expenditure growth rate is arranged at 4.4%, close to the average levels of 2023 and 2024, indicating a commitment to expand fiscal spending to support economic development [6]. 2. How Fiscal Policy Affects Technology Stocks - Technology stock performance is influenced by industry trends and valuations, with fiscal policy impacting the latter through investor sentiment and discount rates [6][7]. - The deficit serves as a signal to boost investor sentiment, while spending affects the discount rate, which in turn influences the intrinsic value of technology companies [6][7]. 3. What is "Technology Stock Friendly" Fiscal Policy? - A high deficit is seen as beneficial for technology stock valuations, as it protects investor sentiment without interfering with industry trends [8]. - Moderate spending that aligns with nominal GDP growth can stabilize technology stock valuations, preventing undue pressure from rising risk premiums [9]. 4. Why This Year May Be "Technology Stock Friendly" - Historical patterns indicate that when the deficit rate increases by 1 percentage point or the broad deficit rate rises by 2 percentage points, technology stocks tend to see valuation increases [10][11]. - The current fiscal spending growth is expected to align closely with nominal GDP growth, which historically has favored technology stocks over consumer stocks [11]. 5. Fiscal Resilience and Challenges - The article posits that the risk of fiscal shortfalls is low this year, supported by strong central and provincial fiscal reserves, which may help mitigate systemic risks [12][13]. - Six major provinces show resilience in their fiscal targets, indicating a potential for recovery in local government revenues, which is crucial for overall fiscal health [13][14].