Fiscal strains are forcing Chinese provinces to slash their budget-revenue expectations for 2026 due to the knock-on effects of a five-year property market slump, and analysts cite the shift as a warning sign that intense debt pressures continue to drag down the nation’s economic growth outlook.
Major provinces are budgeting for 2 to 3 per cent growth this year in general public operating revenue, broadly in line with last year but below broader economic growth targets, Fitch Ratings said in a research note on Wednesday. It pointed to “subdued revenue momentum” and flagged debt-repayment risks.
“We believe local governments will prioritise debt control rather than pursue rapid expansion in infrastructure investment to prop up growth,” Fitch wrote, citing data from 23 Chinese provinces, regions and municipalities.
Low property values were expected to keep local investments in check.
“A sustained rebound in land purchases is unlikely in the near term, keeping [local government] capital revenue weak or flat in many provinces and constraining government-fund spending growth,” the credit rating agency said. “Operating spending discipline is also likely to persist, despite the Ministry of Finance’s indications that fiscal spending would be increased in 2026.
“We expect modest expenditure growth for [local government’s] general public budgets.”
China’s property downturn, a hallmark of broader economic softness, followed an overbuilding of supply and regulatory crackdowns on developers’ debt limits.