Bloomberg reported that China narrowed its combined fiscal deficit for the first time in more than two years, with the shortfall under the country's two largest government budgets shrinking 4.1% year-on-year in the first five months of 2026 to 3.16 trillion yuan ($466 billion), according to Bloomberg calculations based on Ministry of Finance data released Monday. Government expenditure fell 3.9% in May alone — the third consecutive monthly decline — while total spending under the two accounts slipped 0.3% in January-May even as broad revenue rose 0.8%.

Goldman Sachs economists including Lisheng Wang said fiscal policy had become "less supportive of growth in the second quarter versus the first," citing falling land sales revenue and reduced policy bank support, and ruled out significant near-term stimulus given strong exports and the government's modest annual growth target. Goldman subsequently cut its China third-quarter growth forecast from 4.7% to 4.5%, the lower bound of the official full-year target range.

Consumer spending and investment have dropped to post-pandemic lows, though AI-driven export strength has reduced the urgency for broad-based domestic stimulus. Infrastructure spending fell 12% in May after an 18% decline in April, even as Beijing has announced plans to deploy more than 7 trillion yuan on infrastructure including a national computing hub network. Land sale revenue tumbled nearly 36% in May, its eighth straight month of double-digit contraction, while tax revenue rose 6.8% in the month.

ING Bank Greater China chief economist Lynn Song flagged that a government-led investment rebound in the second half remained possible but uncertain relative to declining private investment.