In response to the 2026 economic and fiscal policies unveiled at China’s Two Sessions, Guo-Chen Wang, Associate Research Fellow of The First Research Division at the Chung-Hua Institution for Economic Research (CIER), pointed out that of the official 4.4 trillion yuan in special-purpose bonds, approximately 2.8 trillion yuan must be allocated to resolve local governments’ hidden debts. This leaves relatively limited new resources actually available for economic stimulus, indicating that the Chinese economy continues to face significant downward pressure this year.
Wang noted a persistent gap between China’s fiscal budgets and their actual execution. If annual revenue falls short of expectations, the government often resorts to compressing expenditures. Consequently, it remains to be seen how future spending structures—including defense, public security, and technology—will be adjusted. Furthermore, when factoring in special sovereign bonds, the overarching fiscal deficit pressure is likely higher than official figures suggest.
Given this constrained fiscal space, policy support may increasingly lean on monetary tools, such as expanding policy-oriented lending through the banking system to supplement fiscal momentum. Overall, in the absence of more forceful policy measures, China’s economic growth drivers and market confidence will continue to face challenges, and the risk-bearing capacity of its financial system warrants ongoing scrutiny.
Author: CIER Editorial Team
Date: March 13, 2026