China Prepares New Fiscal Support Measures to Counter Economic Slowdown

China is preparing new fiscal and financial support measures for the second half of 2026, as economic growth slows below Beijing’s annual target. Vice-Finance Minister Liao Min announced the upcoming policy coordination and targeted spending plans during an August press briefing in Beijing.

Policymakers in Beijing are facing mounting pressure to ramp up stimulus as economic data shows domestic demand lagging. Growth has veered below the government’s annual target of 4.5% to 5%, following an expansion of only 4.3% in the second quarter. Government data published in August revealed that industrial output, consumption, and investment all softened more than expected in July, forcing officials to refine their policy toolkit.

Targeted Lending, Subsidies, and the 20-Trillion-Yuan Package

To counteract the slowdown, Beijing’s existing fiscal package to boost domestic demand supported more than 20 trillion yuan ($3 trillion) in new lending during the first seven months of the year. That figure marks an increase of over 4% compared to 2025.

Revised policies designed to stimulate domestic demand took effect on Aug. 1, expanding interest rate subsidies for small and micro-sized businesses alongside consumers. Furthermore, authorities are considering additional assistance for domestic businesses and consumers through loan subsidies and complementary financing support.

Vice-Finance Minister Liao Min outlined these developments during an August briefing in Beijing, noting that a greater share of fiscal spending will head directly toward households and consumption. Rather than launching massive new stimulus programs, leadership pledged at a July Politburo meeting to accelerate spending on already-budgeted infrastructure projects for the remainder of the year.

Balancing Long-Term Reforms and Local Government Debt

While drafting fresh measures for the second half of 2026, Beijing is also working alongside the central bank and financial regulators to place policy coordination on a more institutional footing.

At the same time, central authorities are keeping a tight grip on regional finances. Preventing local governments from taking on new hidden debt must remain an iron discipline, Liao stated during the briefing, emphasizing that fiscal risks in key areas need a steady reduction.

Institutional Frameworks Through 2030

Looking toward the next decade, China plans to deepen fiscal and tax reforms while refining its budget management system. Officials aim to build a clearer framework for central-local fiscal relations characterized by clearly defined responsibilities and more balanced regional development.

China Prepares New Fiscal Support Measures to Counter Economic Slowdown — Photo: Moneycontrol

These structural adjustments form part of a broader strategy to build a stronger and more balanced fiscal system during the country’s next economic plan running through 2030. While the central bank signaled earlier in August that it would maintain an appropriately loose monetary stance and roll out practical measures as needed, it stopped short of announcing explicit cuts to policy rates or banks’ reserve-requirement ratios.