Core Viewpoint - The article discusses the fiscal situation in China for the first half of the year, highlighting the reliance on central government financing while local government spending remains slow. It notes a significant increase in government bond financing and a shift in the use of special bonds towards debt repayment rather than project construction [2][4][6]. Fiscal Revenue and Expenditure - In the first half of the year, the net financing scale of government bonds reached 7.8 trillion yuan, an increase of 4.3 trillion yuan year-on-year, primarily due to special refinancing bonds and bonds for supplementing commercial bank capital being issued in this period [4]. - National fiscal revenue for the first half decreased by 0.6% year-on-year, while expenditure increased by 8.9%, slightly below the initial budget target of 9.3% [6]. - Central government revenue and expenditure growth rates were -2.5% and 37% respectively, both exceeding initial budget expectations, while local government revenue and expenditure growth rates fell short of targets [6][7]. Infrastructure Investment - Despite a 17.6% year-on-year increase in broad fiscal expenditure in June, infrastructure investment growth was only 5.3%, indicating a disconnect between fiscal spending and infrastructure development [7][10]. - The increase in fiscal expenditure was largely driven by one-time capital injections into commercial banks, which inflated June's expenditure figures [10]. Policy Signals - The article indicates a trend towards prioritizing social welfare spending, particularly in education, social security, and healthcare, with a 6.4% year-on-year increase in these areas, outpacing overall fiscal expenditure growth [10][12]. - Recent policy measures include pension increases, subsidies for elderly care, and initiatives for free preschool education, reflecting a focus on supporting vulnerable populations [12]. Special Bonds Usage - The issuance of special bonds accelerated significantly in June and July, with 63.1% of the annual target achieved by mid-year, compared to 44.4% in the previous year [13]. - The allocation of special bonds has shifted, with a growing proportion being used for debt repayment rather than project construction, raising concerns about future infrastructure funding [14][19]. - The article notes that the use of special bonds is now subject to a "negative list" management approach, expanding the potential applications of these funds [19].

Revenue and Expenditure Overview - In the first two months of 2025, the national general public budget revenue was 43,856 billion CNY, a year-on-year decrease of 1.6%[3] - National general public budget expenditure reached 45,096 billion CNY, showing a year-on-year increase of 3.4%[3] - Government fund budget revenue fell to 6,381 billion CNY, down 10.7% year-on-year, while expenditure was 11,358 billion CNY, up 1.2%[3] Tax Revenue Insights - Among the four major tax categories, three showed positive growth: domestic VAT increased by 1.1%, domestic consumption tax by 0.3%, and personal income tax surged by 26.7%[4] - Corporate income tax saw a decline of 10.4%, primarily due to reduced tax payments from certain central financial enterprises[4] - Export tax rebates increased by 16.9%, influenced by potential trade protectionism[4] Fiscal Policy and Spending - The expenditure growth rate of 3.4% significantly outpaced the revenue growth rate, with expenditure progress at 15.2%, exceeding the five-year average by 0.8 percentage points[5] - The government plans to enhance fiscal policies, focusing on consumption and technology innovation, with a budget of 3,000 billion CNY for consumer subsidies, doubling from the previous year[7][8] Support for Key Sectors - Fiscal spending on science and technology reached 11,505 billion CNY last year, growing by 5.7%, and increased by 10.6% in the first two months of 2025[8] - Social security, education, and health-related expenditures rose by 5.4%, outpacing general public fiscal spending growth[8] Risks and Challenges - Potential risks include macroeconomic fluctuations, global economic downturns, geopolitical tensions, and uncertainties in policy and trade relations[8]