China: Slow 2Q fiscal deployment leaves more room for 2H: Near-term focus on execution

研报英文原文证据摘录

China: Slow 2Q fiscal deployment leaves more room for 2H: Near-term focus on execution

Tingting Ge Asia Pacific Economic Research J P M O R G A N(852) 2800-0143 22 July 2026

tingting.ge@jpmorgan.com

deterioration in land sales (vs -14.7% for 2025 full-year) highlights the persistent drag from

the property downturn on local government fiscal conditions. Revenue weakness was

accompanied by a 43.7% decline in fund expenditure, pointing to mounting constraints on

fiscal deployment amid strained local-government finances.

Fiscal delivery slowed in 2Q, leaving more budgetary room for 2H. The contraction in 2Q

FAI reflects a limited pipeline of eligible projects, greater emphasis on debt repayment,

slower government bond issuance and proceeds deployment, and the gradual rollout of

policy-bank tools intended to provide seed capital for new projects. Special local government

bond issuance slowed again month-to-date in July. While the end-June surge in issuance has

created a pool of proceeds for near-term project deployment, it also suggests only a limited

acceleration in fiscal execution despite 2Q GDP (4.3%oya) undershooting full-year target

(4.5-5%). We believe policymakers remain relatively comfortable with the near-term macro

backdrop, as 1H growth of 4.7% is still consistent with the annual target range, reducing the

urgency to immediately step up fiscal delivery.

We continue to see a two-stage fiscal path ahead, with the near-term focus remaining

on execution. Stage 1 centers on deploying NPC-approved budgets and drawing down fiscal

deposits. As project approvals accelerate, government bond issuance picks up, and proceeds

are deployed more quickly, infrastructure and public investment growth could strengthen,

while base effects turn more favorable in 2H.