Core Viewpoint - The article discusses the significant shifts in fiscal policy and revenue structures in China, highlighting three key transitions: debt expression, tax direction, and expenditure structure, which may influence investor perceptions for 2026 [2][4][11]. Group 1: Fiscal Transitions - The debt expression transition indicates a shift from counter-cyclical to cross-cyclical adjustments, with the narrow deficit rate increasing by 1 percentage point to 4% and new government debt reaching 11.86 trillion yuan, a 2.9 trillion yuan increase from the previous year [4][18]. - By the end of 2025, the focus will shift to maintaining necessary fiscal deficits and total debt levels, moving away from previous increases [5][18]. - The capital market's focus is expected to shift towards fiscal revenue, particularly tax revenue, in 2026 [6][18]. Group 2: Tax Direction Transition - In 2025, both revenue accounts are projected to fall short of budget targets, with a year-on-year decline of 2.9%, compared to a 2% decline in 2024, primarily due to significant drops in land sales and non-tax revenues [7][21]. - Tax revenue quality is expected to improve, with tax revenue showing a year-on-year increase of 0.8%, contrasting with a 3.4% decline in 2024, leading to a rise in tax revenue's share of public fiscal income to 81.6%, the highest since 2000 [7][21][22]. - Nearly 90% of regions are expected to see revenue growth in 2025, with local public budget revenue projected at 12.21 trillion yuan, a 2.4% increase from 2024 [8][22]. Group 3: Expenditure Structure Transition - The growth rate of broad fiscal expenditure is expected to align more closely with nominal GDP growth, projected at 3.7% for 2025, compared to 2.7% in 2024 [11][31]. - A significant shift in expenditure structure is noted, moving from material investments to human investments, with social welfare and health expenditures increasing by 4.5% and 4.8% respectively, while infrastructure spending is expected to decline by 7.8% [11][12][31]. - The proportion of new special bonds used for non-project investments has risen sharply to 30% in 2025, compared to less than 5% in previous years, indicating a shift in funding priorities [12][32].