Commentary: China’s Fiscal Focus Shifts to ‘Investing in People’

In the first seven months of 2025, China’s national general public budget revenue reached 13.5839 trillion yuan ($1.94 trillion), marking a modest 0.1% year-on-year increase, while budget expenditure totaled 16.0737 trillion yuan ($2.3 trillion), reflecting a 3.4% rise from a year earlier. This period saw a “divergence” in fiscal performance, with revenues continuing to improve but growth in expenditures slowing down relative to the early months of the year [para. 1][para. 2].

In July 2025 specifically, broad fiscal revenue grew by 3.6% year-on-year, an improvement of 0.8 percentage points from June, while expenditure rose by 12.1%, but the pace of expenditure growth decelerated by 5.5 percentage points compared to June. The budget completion rate for broad fiscal revenue over the first seven months was 56.3%—in line with the five-year average—while expenditure completion was slightly weaker at 51%, compared to the five-year average of 51.7% [para. 2].

This moderation in expenditure growth is thought to result, in part, from a reduced reliance on government debt-financed support. By July, the broad fiscal deficit was reported at 5.6 trillion yuan ($800 billion), up by just 0.4 trillion yuan ($57.1 billion) from June, indicating less new stimulus from debt. The general fiscal deficit narrowed to 2.5 trillion yuan ($357.1 billion), while the government-managed funds deficit widened to 2.7 trillion yuan ($385.7 billion), with funding support primarily from special treasury bonds and new special-purpose bonds. In mid-August, authorities confirmed the full disbursement of 188 billion yuan ($26.9 billion) in investment subsidies (from ultra-long-term special treasury bonds) for equipment renewal, potentially signaling the end of major debt-driven spending surges [para. 3].

Despite the general slowdown in expenditure, spending on public welfare and services such as health, social security, and education accelerated sharply in July, with health and social security/employment spending up 14.2% and 13.1% year-on-year, respectively—significantly faster than in June. Culture, tourism, media, and education expenditures also saw higher growth rates. These trends underscore the government’s focus on investing in sectors that support public welfare, even as overall fiscal expansion slows [para. 4][para. 5][para. 10].

On the revenue side, fiscal performance improved in July, with broad fiscal revenue up 3.6% and government-managed fund revenue increasing by 8.9%, though the latter’s growth rate slid sharply (down 11.9 percentage points from June) due to a slowdown in land sales—a crucial revenue source for local governments. Revenue from local state-owned land conveyances grew 7% year-on-year in July, down 15 percentage points from June’s pace. General fiscal revenue growth was driven by a narrowing decline in non-tax revenue (-1.5% year-on-year) and modest tax growth (0.5%). Notably, stamp duty revenues surged by 24.2%. The budget completion rates for revenue and expenditure were generally close to historical norms but trailed five-year averages in some categories [para. 6][para. 7][para. 8].

The decline in land conveyance revenue also contributed to a marked slowdown in government-managed fund expenditure growth, with July seeing only a 42.4% year-on-year rise (down over 36 percentage points from June). Nonetheless, the budget completion for this category stood at 6.4%, above the five-year average of 5.7% for this point in the year [para. 9].

Overall, China’s fiscal trends in 2025 show continued, but more selective, stimulus—prioritizing public welfare and services—amid a cautious scaling back of debt-financed support and a cooling property sector, reflected in land sales revenue and fund expenditures [para. 1][para. 2][para. 3][para. 4][para. 6][para. 9][para. 10].