China: Fiscal deployment still slow in May: Expect a two-stage fiscal path ahead

Research evidence excerpt

China: Fiscal deployment still slow in May: Expect a two-stage fiscal path ahead

Tingting Ge Asia Pacific Economic Research J P M O R G A N(852) 2800-0143 23 June 2026

tingting.ge@jpmorgan.com

energy shock. The FAI pullback likely also reflects a limited pipeline of eligible projects, a

greater priority on debt repayment, and the slow rollout of policy-bank tools as seed capital

for new projects. After the sharp slowdown in April and May (168bn yuan on average),

special local government bond issuance picked up to nearly 500bn yuan mtd in June

(including scheduled issuance in the coming week), supported by a jump into month-end.

This is good news, signaling reactive acceleration in utilizing the remaining fiscal resources

approved at the March NPC. However, given the lag between bond issuance and the

deployment of proceeds to projects, the month-end step-up in issuance will not be fully

reflected in June investment, though fiscal deposits tend to decline this month due to mid-year

seasonality. Special central government bond issuance remained decent, mainly for the“two

upgrades” and “two majors”, though general CGB issuance slowed mtd in June.

Looking ahead, we characterize the fiscal path as two-stage. Stage 1 is about execution:

deploying NPC-approved budgets and drawing down fiscal deposits. As project approvals

accelerate, alongside faster government bond issuance and quicker deployment of proceeds,

infrastructure and public investment could pick up, and base effects should turn favorable in

2H. Stage 2 is more conditional: if 2Q growth undershoots the 4.5–5% full-year target range,

the case for additional fiscal support in 2H strengthens, though conviction is lower because

the range target gives policymakers more flexibility than in prior years.