China's government is taking a cautious approach to implementing its budget, focusing on preserving spending power to counter potential repercussions from increased US tariffs. Data from the Ministry of Finance shows that combined expenditure in China's main fiscal books, the general public budget and the government fund account, increased by 2.9% to 5.65 trillion yuan ($779 billion) in the first two months compared to the previous year. This represents approximately 13.38% of the planned expenditures for the year, marking the slowest start since 2022.

Economists suggest that the slower spending progress is a deliberate move by authorities to maintain fiscal strength in anticipation of future uncertainties to support ongoing economic recovery. Despite stronger-than-expected growth in consumption, investment, and industrial production during January-February, China remains prepared to implement further stimulus measures if needed.

Government officials have reassured that they have the necessary resources and tools to support the economy, especially as the impact of US tariffs is expected to escalate, potentially affecting more Chinese companies. Total income from the major budgets declined by 2.9% to 5.02 trillion yuan in the initial two months of the year, attributed to a decrease in tax revenue and a slump in land sales by local governments.

To bridge the gap between spending and income, there was a deficit of nearly 622 billion yuan which was financed through substantial debt issuance. In January-February alone, net government bond financing reached around 2.4 trillion yuan, the highest on record for that period. Part of the funds raised is intended for refinancing hidden debts incurred by companies linked to local governments for infrastructure projects.

Bloomberg Economics emphasizes the importance of front-loading spending in 2025 to amplify the impact of fiscal stimulus measures announced at the National People's Congress. The significant increase in bond issuance compared to the previous year indicates authorities' efforts to accelerate spending and break away from previous budgeting practices that could hinder economic growth.