Shenwan Hongyuan: "Incremental Policy" Kicks Off, Fiscal Space for Acceleration Remains

Summary

Event: On May 20, the Ministry of Finance announced the fiscal revenue and expenditure situation for the first four months of 2025. In the first four months, general public budget revenue was 8.0616 trillion yuan, a year-on-year decrease of 0.4%; general public budget expenditure was 9.3581 trillion yuan, a year-on-year increase of 4.6%.

"Incremental policy" has begun, with financial policy already leading, and the subsequent rhythm and direction of fiscal expenditure may be the focus.

The growth rate of general fiscal revenue and expenditure has increased, with the budget completion rate in the first four months higher than the average of the same period in the past five years. In April 2025, general fiscal revenue increased by 2.7% year-on-year, and general fiscal expenditure increased by 12.9% year-on-year, up 4.4 and 2.8 percentage points compared to March, respectively; in terms of budget completion, the general fiscal revenue budget completion rate in the first four months was 33%, higher than the past five-year average of 31.8%; the general fiscal expenditure budget completion rate was 28.4%, slightly higher than the past five-year average of 28.2%.

The acceleration of general fiscal expenditure may be mainly supported by government debt financing. In April 2025, the general fiscal revenue and expenditure deficit was -1.3 trillion yuan, larger than the average of -0.6 trillion yuan for the same period from 2020 to 2024, indicating that funds from government bonds and new general bonds provide effective support for general fiscal operations. Currently, the net financing issuance of government bonds is significantly faster than in the past. As of May 16, the net financing scale of government bonds reached 2.4 trillion yuan, with an issuance progress of 49.4%, significantly higher than the 20.9% in the same period of 2024.

The issuance progress of new special bonds remains slow, with room for acceleration in the future. The acceleration of government fund expenditure in April may be due to the alleviation of the drag from land transfer income. With the real estate sales growth still in a sluggish state, whether land transfer income can continue to recover needs to be monitored. Currently, the issuance progress of new special bonds remains slow, with room for acceleration. As of May 16, the issuance progress of new special bonds was 31%. If the income recovery trend slows down, the issuance of new special bonds may accelerate to support higher expenditure growth.

"Incremental policy" has begun, with financial policy already leading, and the subsequent rhythm and direction of fiscal expenditure may be the focus. The "grace period" for tariffs is also a window for the accelerated implementation of established policies and the strengthening of reserves for incremental policies. On one hand, the finance department focuses on the issuance and use of debt, while on the other hand, it pays attention to the possibility of "continuation." "Quasi-fiscal" measures may be implemented relatively quickly, focusing on financing situations such as government bonds and PSL; budget adjustments have a relatively longer process, with a focus on the upcoming meetings of the Standing Committee of the National People's Congress.

Regular tracking: The growth rate of general fiscal revenue and expenditure continues to rise, with the budget completion rate in the first four months higher than the average of the same period in the past five years.

General fiscal revenue and government fund revenue have improved, driving a rebound in general fiscal revenue. In April 2025, general fiscal revenue increased by 2.7% year-on-year, up 4.4 percentage points compared to March; among them, government fund revenue increased by 8.1% year-on-year, and general fiscal revenue increased by 1.9% year-on-year. In terms of budget completion, the general fiscal revenue budget completion rate in April 2025 was 6.4%, higher than the 5.9% in the same period of 2024, slightly lower than the past five-year average of 6.5% General fiscal and government fund expenditures have accelerated, driving a significant increase in broad fiscal spending. In April 2025, broad fiscal spending increased by 12.9% year-on-year, up 2.8 percentage points from March; general fiscal spending increased by 5.8% year-on-year, and government fund spending increased by 44.7% year-on-year, both showing a significant increase compared to March. In terms of budget completion, broad fiscal spending in April 2025 completed 8.4% of the budget, higher than the average spending progress of 7.6% over the past five years.

Report Body

Event: On May 20, the Ministry of Finance announced the fiscal revenue and expenditure situation for the first four months of 2025. In the first four months, general public budget revenue was 80,616 billion yuan, a year-on-year decrease of 0.4%; general public budget expenditure was 93,581 billion yuan, a year-on-year increase of 4.6%.

1. There is still room for fiscal strength

The growth rate of broad fiscal revenue and expenditure has increased, with the budget completion rate in the first four months higher than the average for the same period over the past five years. In April 2025, broad fiscal revenue increased by 2.7% year-on-year, and broad fiscal expenditure increased by 12.9% year-on-year, up 4.4 and 2.8 percentage points from March, respectively; in terms of budget completion, broad fiscal revenue in the first four months completed 33% of the budget, higher than the past five-year average of 31.8%; broad fiscal expenditure completed 28.4% of the budget, slightly higher than the past five-year average of 28.2%.

Broad fiscal expenditure continues to accelerate, likely supported by government debt financing. In April 2025, the broad fiscal revenue-expenditure gap reached -2.7 trillion yuan, larger than the average of 1.4 trillion yuan for the same period from 2020 to 2024; among them, the general fiscal revenue-expenditure gap was -1.3 trillion yuan, while the average for the same period from 2020 to 2024 was -0.6 trillion yuan, indicating effective support from funds such as government bonds and new general bonds for general fiscal support. In terms of the progress of new government debt issuance, the current net financing issuance of government bonds is significantly faster than in the past. As of May 16, the net financing scale of government bonds reached 2.4 trillion yuan, with an issuance progress of 49.4%, significantly higher than the 20.9% for the same period in 2024.

The issuance progress of new special bonds remains slow, with room for acceleration in the future. In April, local state-owned land transfer revenue increased by 4% year-on-year, with a 21 percentage point increase compared to March. The significant improvement in land transfer revenue may be partly due to the accelerated implementation of local debt funds, alleviating the debt constraints of urban investment companies and easing operational cash flow. Looking ahead, the growth rate of real estate sales remains sluggish, and whether land transfer revenue can continue to recover needs to be monitored. Meanwhile, the issuance progress of new special bonds remains slow, with room for acceleration in the future. As of May 16, the issuance scale of new special bonds was 1.37 trillion yuan, with an issuance progress of 31%, significantly lower than the 43.5% and 43.1% for the same periods in 2022 and 2023, respectively If the recovery of income slows down in the future, the issuance of new special bonds may accelerate to support a higher expenditure growth rate.

"Incremental policies" have begun, with financial policies already in place; the subsequent rhythm and direction of fiscal expenditure may be the focus. The current 90-day tariff "grace period" may not only serve as a buffer for exports but also as a window to accelerate the implementation of established policies and strengthen the reserve of incremental policies. In response to external uncertainties, a package of financial policies has been implemented first. Fiscal policy, on one hand, focuses on the issuance and use of established policy debt quotas, while on the other hand, it emphasizes the possibility of incremental "continuation." Off-budget policies, which are relatively flexible, may be implemented more quickly, closely monitoring financing situations such as government bonds and PSL. If budget adjustments are involved within the budget, the process is relatively longer, with a focus on the upcoming meetings of the Standing Committee of the National People's Congress.

2. Regular Tracking: Broad Fiscal Revenue and Expenditure Accelerate

General fiscal revenue and government fund revenue have improved, driving a rebound in broad fiscal revenue. In April 2025, broad fiscal revenue increased by 2.7% year-on-year, up 4.4 percentage points from March; among them, government fund revenue increased by 8.1% year-on-year, and general fiscal revenue increased by 1.9% year-on-year. In terms of budget completion, the budget completion rate for broad fiscal revenue in April 2025 was 6.4%, higher than 5.9% in the same period of 2024, but slightly lower than the average of 6.5% over the past five years.

Land transfer revenue recovery has significantly improved government fund revenue. In April 2025, government fund revenue increased by 8.1% year-on-year, with a growth rate increase of 19.7 percentage points from March; among them, local state-owned land transfer revenue increased by 4% year-on-year, with a growth rate increase of 21 percentage points from March. The budget completion rate for government fund revenue in April 2025 was 5.3%, higher than 4.4% in the same period of 2024 and the average of 5.1% over the past five years.

Tax revenue continues to recover, supporting the sustained increase in general fiscal revenue growth. In April 2025, general fiscal revenue increased by 1.9% year-on-year, up 1.6 percentage points from March; non-tax revenue fell back, with a year-on-year increase of 1.7% in April, down more than 4 percentage points from March; tax revenue showed marginal recovery, with a year-on-year increase of 1.9% in April, up 4.1 percentage points from March. Among them, stamp duty continued to grow rapidly, increasing by 14.7% year-on-year in April; personal income tax saw significant improvement, increasing by more than 67 percentage points from March, likely due to the low base effect from the misalignment of the Spring Festival. From a cumulative year-on-year perspective, personal income tax in April increased by 7.4% year-on-year, up 0.3 percentage points from March In April 2025, the general fiscal revenue budget completion rate was 9.3%, slightly higher than the same period in 2024 and the average of 9% over the past five years.

Both general fiscal and government fund expenditures accelerated, driving a significant increase in broad fiscal expenditures. In April 2025, broad fiscal expenditures increased by 12.9% year-on-year, with a 2.8 percentage point increase compared to March; general fiscal expenditures increased by 5.8% year-on-year, and government fund expenditures increased by 44.7% year-on-year, both showing a significant increase in expenditure growth compared to March. In terms of budget completion, broad fiscal expenditures in April 2025 completed 8.4% of the budget, higher than the average expenditure progress of 7.6% over the past five years.

Among the components of general fiscal expenditures, infrastructure and livelihood-related expenditures showed relatively high growth rates. In April 2025, general fiscal expenditures increased by 5.8% year-on-year, up 0.1 percentage points from March; among the expenditure components, infrastructure and livelihood-related expenditures such as transportation, urban and rural communities, health care, and social security and employment had relatively high growth rates, with year-on-year increases of 10.6%, 6.8%, 10.3%, and 9.6%, respectively; the expenditure proportions for education and science and technology increased, with respective increases of 1.6, 1.4, and 1.0 percentage points compared to March. The budget completion rate for general fiscal expenditures in April 2025 was 7%, slightly higher than the average of 6.9% over the past five years.

With the recovery of land transfer income, government fund expenditures accelerated significantly. In April 2025, government fund expenditures increased by 44.7% year-on-year, with a growth rate increase of over 16 percentage points compared to March. Considering that the income from local state-owned land transfers significantly recovered in April, increasing by 4% year-on-year, with a growth rate increase of 21 percentage points compared to March. The acceleration of government fund expenditures may be primarily driven by the recovery of income and the accelerated issuance of special bonds. In terms of budget completion, the budget completion rate for government fund expenditures in April 2025 was 5.1%, higher than the average of 4.7% over the past five years.

Authors: Zhao Wei, Jia Dongxu, Hou Qiannan, Source: Shenwan Hongyuan Macro, Original Title: "Fiscal Still Has Room for Acceleration - April Fiscal Data Commentary (Shenwan Macro · Zhao Wei Team)" Risk Warning and Disclaimer

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