Summary of Key Points from the Conference Call Industry Overview - The report focuses on the fiscal situation in China, particularly the augmented fiscal deficit and government revenue and expenditure trends in early 2024. Core Insights and Arguments 1. **Fiscal Revenue and Expenditure Trends** - On-budget fiscal revenue growth rebounded to +0.7% year-on-year (yoy) in January-February from -25.0% yoy in December, primarily due to favorable base effects [3][10] - Fiscal expenditure growth accelerated to +3.6% yoy in January-February from -1.8% yoy in December, driven by increased spending in social security, agriculture, and healthcare [8][10] 2. **Property-Related Revenue Decline** - Property-related government revenue remained depressed, with land sales revenue contracting by -25.2% yoy in January-February, compared to -22.8% yoy in December [9][10] - On-budget property-related tax revenue growth slowed to -1.9% yoy in January-February from +0.1% yoy in December, indicating ongoing challenges in the property sector [9][10] 3. **Augmented Fiscal Deficit Metrics** - The augmented fiscal deficit (AFD) ratio widened to -12.8% of GDP (3-month moving average) as of February, compared to -10.2% in December, indicating increased fiscal pressure [3][10] - The effective fiscal deficit ratio also increased to -6.2% of GDP (3-month moving average) as of February, up from -4.7% in December [3][10] 4. **Government Spending and Fund Deployment** - The fiscal "spend-through" ratio rose to 99.2% in February from 98.2% in December, suggesting that the government is accelerating the deployment of previously raised funds [10][10] - The outstanding fiscal deposit was 4.3% above the year-ago level, indicating a proactive approach to fund management [10][10] Additional Important Insights - The report cautions that January-February only accounted for about 11% of annual land sales revenue in recent years, and a decline of 5-10% in land sales revenue is expected for the year due to ongoing property market challenges [9][10] - The growth in infrastructure-related fiscal spending was modest at +2.4% yoy in January-February, compared to a significant increase in infrastructure investment growth of +7.3% yoy [8][10] This summary encapsulates the key points from the conference call, highlighting the fiscal dynamics in China and the challenges faced in the property sector.

Core Viewpoint - The broad fiscal expenditure is accelerating with structural optimization, and future focus should be on the effects of fiscal and financial collaboration [3][4][71]. Fiscal Revenue and Expenditure Overview - In January-February 2026, the national general public budget revenue was 44,154 billion yuan, a year-on-year increase of 0.7%, while expenditure was 46,706 billion yuan, up 3.6% year-on-year [2][6][70]. - The broad fiscal revenue showed a marginal recovery with a year-on-year decline of 1.4%, significantly improving by 17.1 percentage points compared to December 2025, indicating initial signs of stabilization [3][7][71]. - Broad fiscal expenditure increased significantly by 6.1% year-on-year, with the completion rate of expenditure at 14.1%, higher than the average of the past five years [4][5][47]. Revenue Analysis - The marginal improvement in revenue is primarily supported by the recovery of tax income, while land transfer income remains weak, declining by 25.2% year-on-year [3][13][31]. - Tax revenue turned positive at 0.1% year-on-year, with domestic value-added tax and corporate income tax showing reduced declines, reflecting stabilization in micro-enterprise profits and industrial production [3][37][71]. - Non-tax revenue showed a significant recovery with a year-on-year increase of 3.4% [37]. Expenditure Analysis - General fiscal expenditure increased by 3.6% year-on-year, with notable growth in social welfare (17.3%) and employment (8.6%) expenditures, indicating a focus on livelihood protection [4][19][52]. - Infrastructure-related expenditures, such as transportation and agriculture, saw a significant narrowing of decline, suggesting increased fiscal support for key areas [4][19][52]. - Government fund expenditures surged to 16% year-on-year, primarily due to accelerated issuance of government bonds and pre-allocated funds [4][58][72]. Future Outlook - Fiscal funds are expected to continue accelerating in the first quarter, with a focus on the implementation of fiscal funds and the effects of fiscal-financial collaboration [4][24][72]. - The expansion momentum of broad fiscal policy in the second quarter may still rely on the net issuance of government bonds and the leveraging effect of funds [4][24][72]. - Future fiscal policies are anticipated to align with financial efforts, particularly in new infrastructure and green transformation sectors [4][24][72].

Core Viewpoint - The fiscal data for January-February 2026 indicates a recovery in fiscal revenue and an upward trend in fiscal expenditure, reflecting a strong signal for economic stability and growth at the beginning of the year [4][5]. Fiscal Revenue and Expenditure - In January-February, the combined revenue growth rate for the first and second fiscal accounts improved to -1.4%, compared to -2.9% in the previous period, while expenditure growth rose to 6.1%, up from 3.7% [6]. - The improvement in revenue is supported by a high growth rate in stamp duty, while the decline in land market revenue continues to widen [6][17]. - The general public budget revenue increased by 0.7%, with tax revenue growth at 0.1%, which is below the target of 2.9% for the year [8]. Tax Revenue Structure - Stamp duty continued to show high growth, with a year-on-year increase of 34.7%, while other major tax categories like consumption tax and corporate income tax saw negative growth [11]. - The corporate income tax decreased by 3.9%, and personal income tax growth fell to -6.9%, influenced by the timing of the Lunar New Year [12]. Government Fund Revenue - Government fund revenue saw a significant decline, with a year-on-year decrease of 16%, primarily due to a 25.2% drop in land transfer revenue [17]. Expenditure Trends - The expenditure growth for the first fiscal account rose to 3.6%, driven by strong infrastructure spending, which grew at 11.4% [22]. - Social security expenditure increased by 8.6%, while spending on education and technology saw declines [22]. Special Bonds and Infrastructure Support - The issuance of special bonds has been accelerated, with a total of 824.2 billion yuan issued in January-February, marking an 18.7% progress rate [23]. - The total issuance of special bonds reached 1.03 trillion yuan by March 22, indicating a strong commitment to fiscal support for infrastructure projects [23].

Revenue Insights - In January-February 2026, the national general public budget revenue was CNY 44,154 billion, a year-on-year increase of 0.7%[2] - Tax revenue was CNY 36,393 billion, with a year-on-year growth of 0.1%, while non-tax revenue reached CNY 7,761 billion, growing by 3.4%[2] - The central government's revenue decreased by 1.7% year-on-year, while local government revenue increased by 2.6%[2] Expenditure Trends - General budget expenditure for January-February 2026 was CNY 46,706 billion, a year-on-year increase of 3.6%, outpacing revenue growth[3] - Social security and employment expenditure rose by 8.6%, and health expenditure increased by 17.3%[3] - Infrastructure and technology spending faced pressure, with agricultural and transportation expenditures declining by 1.9% and 1.5%, respectively[3] Government Fund Dynamics - Government fund revenue fell to CNY 5,363 billion, a year-on-year decline of 16%[4] - The expenditure from government funds surged to CNY 13,174 billion, marking a 16% increase year-on-year[4] - The issuance of special bonds has accelerated, contributing to the increased expenditure pace[4]

Revenue and Expenditure Trends - Public fiscal revenue growth in January-February 2026 was 0.7%, an increase of 2.4 percentage points from December 2025[1] - Public fiscal expenditure growth was 3.6%, up 2.6 percentage points from December 2025[1] - The first account deficit usage rate was 3.2%, which is 1.6 percentage points higher than the same period last year[1] Tax Revenue Insights - Tax revenue growth was only 0.1%, down 0.7 percentage points year-on-year, while non-tax revenue grew by 3.4%, an increase of 14.7 percentage points[1] - Corporate income tax and personal income tax negatively impacted tax revenue by 1.0 and 0.8 percentage points respectively due to the timing of tax payments[1] - Domestic VAT contributed positively to tax revenue, increasing by 0.7 percentage points, while import-related VAT and consumption tax increased by 1.5 percentage points[1] Infrastructure and Public Spending - Infrastructure spending growth reached 2.4%, a significant increase of 9.0 percentage points from the previous month, aligning with an 11.4% growth in infrastructure investment[1] - Social welfare spending grew by 6.1%, which is 1.6 percentage points higher than the overall fiscal expenditure growth[1] Government Fund Performance - Government fund revenue decreased by 16.0%, a decline of 9.0 percentage points year-on-year, while government fund expenditure increased by 16.0%, up 4.7 percentage points[1] - Land use rights revenue fell by 25.2%, worsening by 10.5 percentage points compared to last year[1] Overall Fiscal Position - The broad fiscal revenue growth rate was -1.4%, improving by 1.4 percentage points year-on-year, while broad fiscal expenditure growth was 6.1%, up 2.4 percentage points[1] - The proactive fiscal policy at the beginning of the year is expected to support economic growth, with tax revenue likely to receive more support as price levels rise[1]

Revenue Insights - In January-February 2026, the national general public budget revenue was 44,154 billion yuan, a year-on-year increase of 0.7%[6] - The broad fiscal revenue showed a year-on-year decline of 1.4%, but improved significantly by 17.1 percentage points compared to December 2025[2] - Tax revenue turned positive with a year-on-year growth of 0.1%, indicating signs of stabilization in micro-enterprise profits and industrial production[9] Expenditure Insights - National general public budget expenditure reached 46,706 billion yuan in January-February 2026, reflecting a year-on-year growth of 3.6%[6] - Broad fiscal expenditure accelerated significantly to a year-on-year increase of 6.1%, recovering from previous declines[2] - Government fund expenditure surged by 16% year-on-year, primarily due to accelerated issuance of government bonds and pre-allocated funds[11] Structural Changes - Expenditure on health care increased by 17.3% and social security and employment by 8.6%, indicating a focus on public welfare[11] - Infrastructure spending, particularly in transportation and agriculture, showed a significant narrowing of previous declines, reflecting enhanced fiscal support for key areas[11] - The completion rate for broad fiscal expenditure was 14.1%, higher than the five-year average of 13.2%[4] Future Outlook - The first quarter is expected to continue with accelerated fiscal funding, with a focus on the effectiveness of fiscal-financial collaboration[13] - The expansion momentum of broad fiscal policy in the second quarter may still rely on the net issuance of government bonds and financial leverage effects[13] - Continued emphasis on new infrastructure and green transformation is anticipated, with close monitoring of fund allocation in these areas[13]

Revenue Insights - In January-February 2026, the national general public budget revenue was 44,154 billion yuan, a year-on-year increase of 0.7%[6] - The broad fiscal revenue showed a year-on-year decline of 1.4%, but improved significantly by 17.1 percentage points compared to December 2025[2] - Tax revenue turned positive with a year-on-year growth of 0.1%, indicating signs of stabilization in micro-enterprise profits and industrial production[9] Expenditure Trends - General fiscal expenditure in January-February 2026 increased by 3.6% year-on-year, reflecting a significant recovery compared to December 2025[3] - Broad fiscal expenditure grew by 6.1% year-on-year, marking a notable acceleration in spending[4] - Government fund expenditure surged by 16%, benefiting from accelerated government bond issuance and pre-allocated funds[3] Structural Changes - Expenditure on health care rose by 17.3% and social security and employment by 8.6%, indicating a focus on public welfare[12] - Infrastructure spending, particularly in transportation and agriculture, saw a significant narrowing of decline, suggesting enhanced fiscal support for key sectors[12] - The budget completion rate for general fiscal expenditure reached 14.1%, higher than the five-year average of 13.2%[4] Future Outlook - The first quarter is expected to continue with accelerated fiscal funding, with a focus on the effectiveness of fiscal-financial collaboration[14] - The expansion momentum of broad fiscal policy in the second quarter may rely on the net issuance of government bonds and financial leverage effects[14] - Continued emphasis on new infrastructure and green transformation is anticipated, with close monitoring of fund allocation in these areas[14]

Macroeconomic Group - In January-February 2026, national general public fiscal revenue increased by 0.7% year-on-year, rebounding by 2.4 percentage points compared to the previous year, with central revenue rising by 4.8 percentage points to -1.7% and local revenue increasing by 0.2% year-on-year to 2.6% [4] - General public fiscal expenditure increased by 3.6% year-on-year, rebounding by 2.6 percentage points compared to the previous year, with central expenditure decreasing by 1.2 percentage points to 4.5% and local expenditure increasing by 3.3 percentage points to 3.5% [4] - Government fund revenue decreased by 16% year-on-year, falling by 9 percentage points compared to the previous year, while government fund expenditure growth was 16%, rebounding by 4.7 percentage points [4] Industry Comprehensive Group - AAC Technologies (2018.HK) reported a record high revenue of RMB 31.82 billion for the full year of 2025, a year-on-year increase of 16.4%, with net profit rising by 39.8% to RMB 2.51 billion [8] - The company expects sales revenue growth in 2026 to be no less than that of 2025, with a stable gross margin projected to rise from 22.1% in 2025 [8] - Concerns exist regarding potential negative growth in consumer electronics sales due to rising prices of electronic components, but current market demand does not show significant decline [8] Consumer Group - Alibaba's total revenue for FY2026 Q3 was RMB 284.8 billion, a year-on-year increase of 2%, with a 9% increase when excluding disposed businesses [11] - Operating profit and adjusted EBITA decreased by 74% and 57% year-on-year, respectively, due to increased investments in instant retail and user experience optimization [11] - Instant retail showed significant growth with a 56% year-on-year revenue increase, while core e-commerce growth was only 1%, indicating pressure on traditional e-commerce [11]

Revenue Insights - In January-February 2026, the general public budget revenue reached 4.4 trillion yuan, with a year-on-year growth of 0.7%, below the target growth rate of 2.2%[3] - Central revenue decreased by 1.7% year-on-year, while local revenue increased by 2.6%, exceeding the target growth rate[3] - Tax revenue grew by 0.1% year-on-year, and non-tax revenue increased by 3.4%, both turning positive compared to December 2025[3] Expenditure Insights - In January-February 2026, total fiscal expenditure was 4.7 trillion yuan, with a year-on-year growth of 3.6%, slightly below the annual target growth rate of 4.4%[17] - Central and local expenditure growth rates were 4.5% and 3.5%, respectively, with public fiscal expenditure progress at 15.6%, higher than the previous year and the 5-year average of 14.8%[17] - Significant increases were noted in social security and employment expenditures, which rose by 16 percentage points[18] Fund Insights - Government fund revenue decreased by 16% year-on-year, significantly below the budget target of 0.6%, with land use rights revenue dropping by 25.2%[22] - Government fund expenditure grew by 16%, surpassing the target growth rate of 5.1%, primarily due to higher issuance of special bonds compared to the previous year[22] Market Outlook - Fiscal spending is expected to support economic recovery, with a focus on improving living standards and stabilizing revenue through price recovery[2] - The overall fiscal deficit rate is projected to decrease, but the effectiveness of policies may enhance demand further as PPI recovers[2] Risks - Potential risks include unexpected policy changes, slower-than-expected economic recovery, and the possibility of historical experience becoming less relevant[25][26]

Core Insights - The Ministry of Finance reported that from January to February, the national general public budget revenue was approximately 44,154 billion yuan, a year-on-year increase of 0.7% [1] - The general public budget expenditure for the same period was 46,706 billion yuan, reflecting a year-on-year growth of 3.6% [1] Revenue Breakdown - Tax revenue amounted to 36,393 billion yuan, with a slight increase of 0.1% year-on-year, while non-tax revenue reached 7,761 billion yuan, growing by 3.4% [1] - Domestic value-added tax collected was 15,838 billion yuan, up 4.7% year-on-year, driven by improvements in industrial and service sector production [1] - Corporate income tax revenue was 8,759 billion yuan, showing a decline of 3.9% year-on-year, attributed to a high base effect from the previous year [1] Import and Export Taxation - Import goods value-added tax and consumption tax totaled 2,963 billion yuan, marking a year-on-year increase of 12.9%, while tariffs reached 361 billion yuan, up 14.4% [2] - Export goods value-added tax and consumption tax refunds were 5,569 billion yuan, reflecting a year-on-year growth of 9.7% [2] Personal Income Tax Trends - Personal income tax collected was 3,846 billion yuan, down 6.9% year-on-year, primarily due to the timing of year-end bonuses and tax payments [2] - The decline in personal income tax is expected to reverse in March due to the later timing of the Spring Festival this year [2] Sector Performance - The securities transaction stamp duty reached 499 billion yuan, a significant increase of 1.1 times, driven by active stock market trading [2] - The manufacturing sector, modern services, and service consumption during the Spring Festival saw notable tax revenue growth, with specific increases of 9% in computer and communication equipment manufacturing and 15.8% in scientific research and technical services [2] Real Estate Market Insights - The real estate market showed signs of increased activity, but land transfer income fell to 3,547 billion yuan, a decrease of 25.2% year-on-year [3]