April Fiscal Expenditure Contracts; Infrastructure Investment Slows Sharply

Overview

This report analyzes China’s fiscal revenue and expenditure data for April 2026 and its implications for the macroeconomy. The core conclusion is that April’s fiscal expenditure contracted unexpectedly—particularly infrastructure spending—reflecting weakness in fixed-asset investment. Although fiscal revenue remained robust, both revenue and expenditure in the government fund account contracted sharply due to the property market downturn. The report argues that current fiscal execution is slower than anticipated at the start of the year, partly explaining recent domestic activity softness—but also implying that the steep H2 fiscal impulse tapering feared by markets may prove less severe.

Core views

Revenue performance remains solid, but expenditure has slowed markedly. General public budget revenue rose 6.7% YoY in April, lifting the year-to-date growth rate to 3.5%, surpassing the full-year budget target of 2.2%; this was driven primarily by an 8.2% YoY increase in tax revenue, while non-tax revenue fell 5.3%. In contrast, general public budget expenditure shifted from +2.6% YoY growth in Q1 to -3.2% YoY in April—well below the full-year budget target of +4.4%. Infrastructure spending is the main drag on expenditure. Infrastructure-related expenditure contracted sharply by 18.6% YoY in April, reversing the +2.4% growth seen in Jan–Feb. This aligns with the sharp deceleration in infrastructure fixed-asset investment (-4.5% YoY) and public-sector fixed-asset investment (-6.3% YoY). Although policy emphasizes 'people-centered' investments (e.g., education, healthcare), growth in livelihood-related spending also slowed—from +5.3% YoY in Q1 to +1.2% YoY in April. The government fund account suffered severe pressure from the land market slump. As the largest financing source for this fund, land sales are critical. Government fund revenue fell 26.4% YoY in April, primarily due to a 34.8% YoY plunge in land transfer income; expenditure fell 20.8% YoY. The acceleration in land sales contraction (vs. -14.7% for all of 2025) underscores the ongoing drag of property/land market weakness on local government finances. An abnormal surge in fiscal deposits signals delayed expenditure execution. Fiscal deposits rose by RMB 739 billion in April, reaching RMB 1.2 trillion—the highest level in recent years—and more than double or triple typical seasonal increases. This suggests disbursement speed slowed notably after three months of spending, likely due to policy patience or complacency (following strong Q1 GDP growth), insufficient qualified project pipelines, debt repayment priorities, and slow rollout of policy bank tools as seed capital for new projects.

Analysis framework

The report employs a macro-fiscal analytical framework, dissecting revenue and expenditure structures across the two main fiscal accounts—general public budget and government fund—and linking them to fixed-asset investment (FAI) data to assess the real-world implementation intensity of fiscal policy and its impact on the real economy. The institution pays particular attention to changes in fiscal deposits, treating them as a high-frequency indicator of fiscal spending pace and policy intent. Simultaneously, the report benchmarks short-term fiscal data against the full-year GDP growth target to infer the likelihood of policy adjustments in H2.

Methodology notes

• Macroeconomic framework

  Fiscal Impulse Analysis

  Assesses the fiscal policy’s growth stimulus or drag by analyzing the change rate of fiscal expenditure relative to economic size (i.e., the fiscal impulse). This report gauges the degree of H2 fiscal impulse moderation—and potential reversal—by observing the slowdown in expenditure growth and accumulation of fiscal deposits.

• Sector/Industry Analysis FrameworkUpstream-Midstream-Downstream Industrial Chain Transmission

  Transmission of Land-Based Finance to Local Government Finances

  Analyzes how land sales performance in the real estate sector (upstream/source) transmits via the government fund account to local governments’ disposable financial resources (downstream), thereby affecting their capacity to fund infrastructure and livelihood expenditures.

Key data

• YoY Growth Rate of General Public Budget Revenue (April)6.7%Cumulative YTD growth: 3.5%
• YoY Growth Rate of General Public Budget Expenditure (April)-3.2%Q1: +2.6%
• YoY Growth Rate of Infrastructure Expenditure (April)-18.6%Jan–Feb: +2.4%
• YoY Growth Rate of Government Fund Revenue (April)-26.4%Dragged by a 34.8% YoY decline in land transfer income
• Increase in Fiscal Deposits (April)RMB 73.9 billionTotal reached RMB 1.2 trillion—highest in recent years
• Baseline Q2 GDP Growth ForecastQoQ annualized 4.0% / YoY 4.9%Downside risks rise if April’s weakness persists

Impact & implications

The near-term domestic activity slowdown is partly attributable to lagging fiscal execution. Because fiscal spending has not front-loaded as expected, the steep H2 fiscal impulse tapering previously feared by markets may prove less pronounced. Should April’s weakness persist, fiscal execution may accelerate over the coming months. With faster project approvals, accelerated government bond issuance (especially special-purpose bonds), and quicker fund disbursement, infrastructure and public investment could rebound from April’s sharp contraction. Moreover, the steady commitment to urban renewal may provide modest support to infrastructure and real estate investment. If Q2 growth falls significantly below the 4.5–5% full-year target range, the rationale for introducing additional fiscal support in H2 would strengthen—though the target range grants policymakers greater flexibility than in prior years, lowering the certainty of such action.

Risks

• Q2 GDP growth significantly below the 4.5–5% target range
• Persistent land sales weakness eroding local government fiscal capacity
• Insufficient pipeline of qualified projects constraining investment expansion
• Slow rollout of policy bank instruments

What to watch

• Whether industrial production (IP) achieves >1% MoM rebound in May and June
• Issuance and fund utilization progress of government bonds—especially special-purpose bonds
• Acceleration in project approval pace
• Introduction of additional fiscal support measures in H2