China’s broad fiscal deficit was 8.1% of GDP in 2025. That was 0.9 percentage points below the approved target, but higher than the 7.2% recorded in 2024. In 2025, spending missed the target by more than revenue did. As a result, some budgeted funds were not used and can be carried into 2026.

Deficit Outlook For 2026

In 2026, the broad deficit is forecast to rise to 8.5% of GDP. Part of this gap is expected to be covered by unused funds from 2025. The official deficit ratio for 2026 is expected to be 3.8% of GDP, down from 4.0% in 2025. This shift is linked to a lower expected growth target. Fiscal support in 2026 is likely to focus on major Five-Year Plan projects and boosting consumption. The gap between revenue and spending is expected to be wider than the official deficit. China looks set to keep a supportive fiscal stance through 2026. The government underspent in 2025, leaving funds available to use this year. That creates room for a positive fiscal impulse to support growth.

Market Implications And Trade Ideas

We forecast a broad budget deficit of 8.5% of GDP for 2026, slightly above the 8.1% posted in 2025. The official target announced in March may be a bit lower. Even so, the main point is that China still has room to increase spending. This supports assets linked to Chinese growth in the weeks ahead. With spending likely to lean toward consumption, call options on large-cap Chinese equity ETFs may look attractive. Retail sales showed signs of stabilizing in late 2025, and continued fiscal support should help consumer-facing firms. Positioning for a broader market move higher ahead of March policy announcements could be a workable strategy. The focus on Five-Year Plan projects should also support industrial commodities. Copper has already firmed above $8,700 per tonne on the LME this month, driven by renewed demand expectations. Traders could consider long copper futures or bull call spreads to position for stronger infrastructure and manufacturing investment. Recent data also supports this constructive view. China’s Caixin Manufacturing PMI for January 2026 came in at 50.9, which signals expansion. This suggests the industrial sector is already growing, even before this year’s fiscal measures fully take effect, and may be able to absorb additional stimulus. If growth responds more strongly than expected, the yuan could also benefit. Stronger activity and sentiment could support an appreciation versus the dollar. Options that profit from a lower USD/CNH exchange rate offer another way to express this view. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now