Fiscal revenue accelerated notably in March, but expenditure momentum slowed

Overview

This report analyzes China's fiscal revenue and expenditure performance in March 2026. The core conclusion is that the revenue side improved notably, especially with a rebound in tax revenue; however, expenditure growth slowed, with infrastructure-related spending acting as a clear drag. Real estate-related fiscal revenue remained weak, and land sale revenue continued to decline by double digits. Combining on-budget and off-budget financing channels, Goldman Sachs' augmented fiscal deficit indicator was broadly flat on a 12-month moving average basis, while the pace of fiscal fund spending edged down, indicating that spending of previously raised government funds stalled somewhat in March.

Core views

The report argues that the improvement in fiscal revenue in March does not mean fiscal expansion accelerated materially. The revenue side was supported by rising PPI inflation and improved tax revenue, but the expenditure side, especially infrastructure-related fiscal spending, slowed noticeably. Real estate revenue remains a source of fiscal pressure. Although home transactions in some large cities have shown preliminary improvement, land sale revenue is expected to continue declining this year and possibly for longer. As Q1 GDP performed better than expected, the need for large-scale policy stimulus in the short term has diminished, and Goldman Sachs maintains low expectations for significant stimulus measures from the April Politburo meeting.

Analysis framework

The report uses data from the Ministry of Finance, Wind, CEIC, and others to compare YoY growth and seasonally adjusted MoM performance in March versus Jan-Feb, and incorporates the general public budget, government fund budget, and off-budget financing channels such as local special bonds, LGFV bonds, policy bank support, and shadow banking loans into a comprehensive fiscal assessment. The analysis focuses on on-budget fiscal revenue and expenditure, real estate-related government revenue, the effective fiscal deficit, the augmented fiscal deficit, and the pace of fiscal fund spending.

Methodology notes

• Fiscal IndicatorAugmented Fiscal Deficit

  augmented fiscal deficit / AFD

  A proprietary Goldman Sachs indicator that adds the on-budget effective fiscal deficit to the off-budget fiscal deficit. Off-budget channels include new local government special bonds, land sale revenue, LGFV bonds, policy bank support, and shadow banking loans, and it is used to measure broader fiscal expansion.

• Fiscal IndicatorEffective Fiscal Deficit Ratio

  effective fiscal deficit ratio

  Goldman Sachs' seasonally adjusted fiscal deficit as a share of GDP, used to observe short- and medium-term changes in the on-budget fiscal gap.

• Fiscal ExecutionFiscal Spend-Through Ratio

  fiscal spend-through ratio

  Used to measure the progress of converting already raised government funds into actual spending; on a 12-month moving average basis, it edged down from 99.2% in February to 99.1% in March.

• Expenditure BreakdownInfrastructure-Related Fiscal Spending

  infrastructure-related fiscal spending

  The report classifies fiscal expenditure on energy conservation and environmental protection, agriculture/forestry/water, transportation, and urban-rural community affairs as infrastructure-related fiscal spending, which fell to -8.5% YoY in March.

• Revenue BreakdownProperty-Related Government Revenue

  property-related government revenue

  Combines off-budget land sale revenue with on-budget real estate-related taxes, which include property tax, deed tax, land appreciation tax, urban land use tax, and cultivated land occupation tax.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China Macroeconomy

  Fiscal policy is directly related to economic growth expectations

  Strengths

  Fiscal revenue improved YoY, and better-than-expected Q1 GDP reduced near-term growth pressure.

  Weaknesses

  Fiscal expenditure growth slowed, government fund spending momentum stalled, and real estate-related revenue continues to drag on fiscal capacity.

  Comparison

  Revenue growth in March improved significantly versus Jan-Feb, but expenditure growth fell back compared with Jan-Feb.

  Risks

  If subsequent economic momentum slows and policy stimulus remains insufficient, growth expectations may come under pressure again.

• Real estate chain

  Land sale revenue and real estate-related taxes are important sources of local fiscal revenue

  Strengths

  Home transactions in some major cities have shown preliminary signs of improvement.

  Weaknesses

  Land sale revenue is still falling by double digits, the decline in real estate-related taxes has widened, and conditions in lower-tier cities and developer financing remain weak.

  Comparison

  Directly property-related government revenue fell 17.3% YoY in March, weaker than -16.3% in Jan-Feb.

  Risks

  A prolonged real estate downturn may continue to suppress local fiscal revenue and the land market.

• Infrastructure and local government financing

  Fiscal expenditure, special bonds, LGFV bonds, and policy bank support affect funding sources for infrastructure

  Strengths

  Some off-budget financing channels may support infrastructure investment.

  Weaknesses

  On-budget infrastructure-related fiscal expenditure fell to -8.5% YoY in March, clearly dragging on fiscal expenditure.

  Comparison

  Infrastructure investment growth slowed from 7.3% in Jan-Feb to 5.8% in March, a smaller decline than that of on-budget infrastructure fiscal spending.

  Risks

  If off-budget financing cannot continue to offset slower on-budget spending, infrastructure investment may face downward pressure.

Key data

• On-budget fiscal revenue growthYoY +6.9% in March 2026; YoY +0.7% in Jan-FebGoldman Sachs estimates the seasonally adjusted non-annualized MoM growth at +2.2% in March, versus +1.7% in Jan-Feb.
• Tax revenue growthYoY +9.1% in March 2026; YoY +0.1% in Jan-FebThe improvement mainly came from faster growth in personal income tax and consumption tax revenue.
• On-budget fiscal expenditure growthYoY +1.0% in March 2026; YoY +3.6% in Jan-FebThe seasonally adjusted non-annualized MoM growth was -0.3% in March.
• Infrastructure-related on-budget fiscal expenditureYoY -8.5% in March 2026; YoY +2.4% in Jan-FebSignificantly weaker than the slowdown in infrastructure investment growth over the same period.
• Land sale revenue growthYoY -22.6% in March 2026; YoY -25.2% in Jan-FebIt remained in double-digit contraction.
• Real estate-related tax revenue growthYoY -12.2% in March 2026; YoY -1.9% in Jan-FebThis indicates mounting pressure on real estate-related fiscal revenue.
• Directly property-related government revenueYoY -17.3% in March 2026; YoY -16.3% in Jan-FebEstimated by combining land sale revenue and real estate-related taxes.
• Effective fiscal deficit ratio-5.5% of GDP as of March (3-month moving average) and -5.0% (12-month moving average)The February readings were -6.1% and -5.1%, respectively.
• Augmented fiscal deficit ratio-12.9% of GDP as of March (3-month moving average) and -11.4% (12-month moving average)The February readings were -13.4% and -11.4%, respectively; the 12-month moving average was broadly unchanged.
• Fiscal spend-through ratio99.1% in March 2026; 99.2% in FebruaryA slight decline on a 12-month moving average basis.
• Fiscal deposit balanceAs of March, 5.3% higher than the same period last year, about RMB 340 billionIn February, it was 4.3% higher YoY, about RMB 309 billion.

Impact & implications

The improvement in fiscal revenue helps ease short-term fiscal pressure, but slower expenditure growth and weak real estate revenue limit the marginal boost from fiscal policy to the economy. The augmented fiscal deficit indicator does not show further expansion, and the decline in the fiscal spend-through ratio suggests that the transmission of policy funds into real-economy spending has not accelerated. For markets, short-term macro policy expectations may remain restrained, especially with Q1 GDP beating expectations, leading the report to view the probability of strong stimulus from the April Politburo meeting as low.

Risks

• Changes in PPI and economic activity may affect the sustainability of the improvement in fiscal revenue.
• A longer-than-expected real estate downturn could continue to drag on land sale revenue and real estate-related taxes.
• A continued decline in the fiscal spend-through ratio could lead to weaker-than-expected support from already raised funds to the real economy.
• If external demand or domestic demand weakens while policy stimulus remains limited, macro growth expectations may come under pressure.
• Uncertainty in off-budget financing channels may affect infrastructure and local fiscal execution.

What to watch

• Whether the April Politburo meeting releases signals of additional fiscal or property support.
• Whether tax revenue can sustain the March improvement in subsequent months.
• Whether the declines in land sale revenue and real estate-related taxes narrow.
• Whether infrastructure-related fiscal expenditure returns to growth.
• Whether the augmented fiscal deficit ratio and fiscal spend-through ratio turn up again.
• Changes in the fiscal deposit balance, to observe whether raised funds are being converted into spending more quickly.