China just did something it hasn’t done in over two years: shrink its cumulative fiscal deficit. In a global environment where most major economies are spending like there’s no tomorrow, Beijing is going the other direction.
The numbers behind Beijing’s belt-tightening
China’s official budget deficit target sits at 4% of GDP, a figure that’s remained unchanged heading into 2026.
Fitch Ratings projects the broader fiscal deficit will decrease from 7.6% of GDP in 2025 to 7.3% in 2026. The reason isn’t exactly fiscal discipline in the traditional sense. It’s largely because China tends to under-execute its own ambitious budget targets.
When you account for local government financing vehicles and other off-balance-sheet spending, the effective deficit reached approximately 9% of GDP in 2025. That’s more than double the official target.
