Fiscal Account Insights at Year Start: Front-Loaded Expenditures Drive Significant Growth in Infrastructure and Public Welfare Spending

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Journalist Wang Zhen

Data from the Ministry of Finance shows that from January to February, the national general public budget revenue was 4.4154 trillion yuan, up 0.7% year-on-year, while general public budget expenditure was 4.6706 trillion yuan, up 3.6%.

Analysts point out that the fiscal revenue and expenditure growth in the first two months of this year roughly align with early economic data. On one hand, revenue has recovered slightly, with general public budget income slightly higher than the same period last year; on the other hand, spending has been vigorous, with clear signs of front-loaded efforts.

“Consistent with the economic data at the start of the year, there is a clear divergence in fiscal revenue in January and February. Supported by strong exports and rising prices, corporate-related taxes performed better than those from residents; on the expenditure side, there was a noticeable acceleration, with front-loaded fiscal efforts evident, and growth in infrastructure and social welfare-related spending has increased,” said Xiong Yuan, Chief Economist at Guosheng Securities, to Jiemian News.

He expects a strong start to the economy in the first quarter, but the pattern of “strong supply, weak demand” still persists, especially with weak performance in real estate and consumption. Going forward, the focus of fiscal policy remains on implementation and accelerating the rollout of existing policies to quickly generate tangible results.

In terms of revenue, in the first two months, tax revenue was 3.6393 trillion yuan, up 0.1% year-on-year. Looking at major tax categories, domestic VAT increased by 4.7% year-on-year, 3.6 percentage points higher than the same period last year. VAT, which is based on value added during production and operation, is highly related to industrial value added, which grew rapidly in January-February, up 6.3% compared to the same period last year. Corporate income tax decreased by 3.9% year-on-year, with the decline narrowing by 6.5 percentage points from last year. Xiong Yuan pointed out that this is mainly due to marginal improvements in prices and profit margins, boosting corporate profitability. Domestic consumption tax fell by 6.2% year-on-year, mainly dragged down by large-weight items like petroleum products and automobiles. Personal income tax declined by 6.9%, related to the high base effect caused by the offsetting timing of the Spring Festival last year.

Additionally, taxes related to capital markets and specific industries performed well, especially stamp duty on securities transactions and vehicle purchase tax, which grew 110% and 11.5% respectively in January-February. Real estate-related taxes, however, remained sluggish, with land value-added tax down 8.2% and deed tax down 11.1% year-on-year.

“Both domestic consumption tax and income tax declined, indicating that the foundation for consumption recovery is still weak. Industrial enterprise profits are still in the process of recovery, and some industries continue to face operational pressures. The overall sluggishness in real estate taxes suggests that market confidence and transaction activity need further policy support,” said Hou Huan, Analyst at Guotai Haitong Securities.

Notably, non-tax revenue increased by 3.4% year-on-year in January-February, marking the first positive growth since April 2025.

Zhang Di, Chief Macroeconomist at China Galaxy Securities, told Jiemian News that the government work report this year emphasizes increasing fiscal resources and budget coordination, and raising the share of state-owned capital returns. The positive growth in non-tax revenue in the first two months may be partly related to increased dividends from state-owned enterprises and partly to local governments’ continued efforts to activate assets, both supporting non-tax income.

Public budget revenue accounted for 20% of the annual budget in the first two months, roughly the same as last year. In contrast, expenditure reached 15.6%, 0.4 percentage points faster than the same period last year, reflecting a policy focus on front-loaded fiscal efforts.

Spending is tilted toward social welfare and infrastructure investment. Social welfare expenditure increased by 5.9% year-on-year, higher than last year’s 5.4%, with social security and employment up 8.6% and health and wellness up 17.3%. Education, cultural tourism, sports, and media declined by 2.1% and 1.4%. Infrastructure spending increased by 2.4% year-on-year, after a 5.6% decline last year, with energy conservation and environmental protection, and urban and rural community spending rising 5.4% and 7.7%, while agriculture, forestry, water, and transportation expenditures declined 1.9% and 1.5%.

The Ministry of Finance’s second budget—government fund budget—shows that in January-February, revenue was 536.3 billion yuan, down 16% year-on-year. Local government land transfer income was 354.7 billion yuan, down 25.2%, with the decline widening by 10.5 percentage points from December last year.

Zhang Di pointed out that land transfer income continued to decline in the first two months, corresponding to an 11.1% year-on-year drop in real estate investment. Additionally, according to CRIC data, in February, land transaction area and value fell 21% and 29% respectively year-on-year, with land market activity still contracting.

Recently, the Ministry of Finance released reports on the implementation of the 2025 central and local budgets and the 2025 fiscal policy execution, reviewing last year’s fiscal operations and key tax policies, and outlining this year’s fiscal policy deployment.

Wen Bin, Chief Economist and Director of the Research Institute at China Minsheng Bank, analyzed that overall, this year’s fiscal policy continues a “more proactive” tone, focusing on “increasing total volume, optimizing structure, improving efficiency, and strengthening momentum,” to ensure a good start for the 14th Five-Year Plan.

He further explained that total fiscal expenditure this year is projected at 41.88 trillion yuan, an increase of 1.85 trillion yuan from last year’s actual spending; the general deficit is expected to be 11.89 trillion yuan, up 300 billion yuan from last year’s budget. Structurally, efforts will continue to optimize expenditure and debt structure—more funds will be directed toward boosting consumption, investing in people and social security, and increasing central government debt share to transfer payments to local governments, easing local debt pressures. To improve efficiency, measures include: timely and appropriate policy implementation, strengthening execution, emphasizing policy evaluation and accountability; enhancing fiscal and financial coordination with a 100 billion yuan special fund to stimulate domestic demand; and strengthening full-process management of special bonds, refining the “negative list” for bond projects, and adjusting the scope of “self-review and spontaneous” projects.

Additionally, Wen Bin noted that to enhance local fiscal autonomy, the Ministry of Finance proposes reforms such as local additional taxes, improving a comprehensive and classified personal income tax system, and optimizing transfer payment structures. However, the reform of consumption tax emphasizes “adjusting and optimizing the scope and rates, and advancing the shift of some items’ collection links,” without reiterating “devolving authority to local governments,” indicating that the focus this year remains on improving tax system design and administration.