ALBAWABA- China’s finance ministry has signaled a shift toward a more aggressive fiscal policy in 2026, underscoring Beijing’s preparations for renewed economic pressure from an escalating trade confrontation with the United States.
Finance Minister Lan Fo’an said fiscal policy would become more “proactive,” with expanded government spending aimed at maintaining expenditure momentum and boosting domestic demand.
Speaking at a national fiscal and taxation work conference, Lan emphasized increased use of government bond issuance and more efficient transfer payments to support what officials describe as “high-quality development.” The message reflects Beijing’s growing reliance on fiscal tools as traditional growth drivers weaken.
The policy adjustment comes as China faces mounting economic headwinds, including a prolonged property sector downturn, subdued consumer spending, and growth projections hovering around 5% in 2026.
Authorities have already rolled out major stimulus measures, including a 10 trillion yuan ($1.4 trillion) debt package announced in October 2025, to stabilize markets and shore up confidence. However, economists continue to warn that rising local government debt could limit Beijing’s fiscal room for maneuver.
The renewed emphasis on fiscal expansion is also closely tied to intensifying U.S.–China trade tensions. US President Donald Trump has threatened tariffs of up to 60% on Chinese imports, a move analysts say could cut bilateral trade by as much as $200 billion annually.
Beijing’s proactive fiscal posture appears designed to cushion export-oriented industries, offset potential tariff shocks, and strengthen domestic demand, echoing China’s strategy during the 2018–2020 tariff war.
