(Aug 21): China is doubling down on a programme that’s tapping fiscal resources to drive borrowing by businesses and consumers, with new measures set for launch in the rest of the year as economic growth veers below the government’s annual target.

“We’ve been studying and drafting new coordinated fiscal and financial policies that will be introduced in the second half of this year,” Vice Finance Minister Liao Min said at a briefing in Beijing on Friday. 

The announcement marks the latest attempt by the government to ramp up support for the economy. It also underscores the focus by the authorities on targeted fiscal measures to revive credit demand and expand private spending against the backdrop of mounting fiscal strains at the local level.

In his remarks, Liao was referring to the programme introduced earlier this year that provided perks including discounted lending backed by fiscal subsidies to companies and consumers, alongside loan guarantees to spur private investment.

The effort has already been expanded since Aug 1 to make more types of loans eligible for the interest rate subsidies meant for small and micro businesses and consumers. The fiscal package to boost domestic demand supported more than 20 trillion yuan (US$3 trillion or RM12.03 trillion) in new lending during the first seven months of the year, an increase of over 4% from 2025. 

Government data published earlier in the week showed China’s industrial output, consumption and investment all softened more than expected in July. Pressure on policymakers to step up stimulus is on the rise, given many economists estimate gross domestic product growth has slipped further below Beijing’s annual target of 4.5%-5% after reaching only 4.3% in the second quarter.

Still, Liao indicated the Chinese government’s bond quota already planned for this year is sufficient to ensure it will maintain “fiscal spending intensity”, noting there is more than two trillion yuan in the allowance available in the coming months.

The Ministry of Finance will guide local governments to issue the bonds, accelerate fiscal spending and strengthen oversight of regions where the pace has been slow, in an effort to push for an early start in delivering on projects, he said. 

The comments by Liao, who’s also a top Chinese negotiator in trade talks with the US, indicated that concerns in Beijing are growing over the government’s ability to make ends meet while keeping debt risks in check.

China will seek to build a “stronger, more consolidated, more balanced and sustainable” fiscal system during its next economic plan through 2030, Liao said.

Policymakers aim to consolidate all revenues derived from their use of administrative powers, government credit, and state-owned resources and assets fully under China’s budget management as they seek to “continuously cultivate stable and sustainable fiscal revenue sources”, he said. 

Authorities also plan to push back “firmly” against any build-up of new “hidden debt” and will conduct a “systemic” review of tax breaks introduced in the past. The goal is to terminate or adjust measures to reduce “fragmented policies” and market distortion, Liao said. 

The government will also step up a crackdown on illicit local subsidies and build an approval mechanism for new aid, he said, adding that a list has already been created that identifies measures that must no longer be offered.

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