BEIJING – October 28, 2026 – Fiscal funds are poised to flow from the treasury into specific projects and be converted into physical workload, which is key to releasing the effectiveness of fiscal policy, and the ample room for countercyclical adjustment, together with improving investment efficiency and a clear path for shifting from old to new growth drivers, is consolidating the fundamentals of China’s market, economist Tao Chuan said.
Tao, Chief Economist at Guolian Minsheng Securities, made the remarks in a written interview with China News Service (CNS) issued here on Tuesday, noting that the effect of fiscal policy depends not only on the scale of fundraising, but also on the efficiency with which funds are converted into consumption, investment, and physical workload.
A series of recent articles in People’s Daily pointed out that the daily average balance of funds in the national treasury is relatively large and fiscal funds available for use are relatively abundant, Tao said, noting the indication that the fiscal reserves are currently substantial and there is ample room for countercyclical adjustment, yet the funds exhibit a phase of temporary accumulation.
“The next key step is to accelerate the use of fiscal funds, push funds into specific projects as soon as possible, and translate policy space into momentum for economic development and endogenous recovery,” he told CNS.
According to Tao, a sum of fiscal funds goes through a complete process of “revenue collection — treasury accumulation — targeted allocation — conversion into the real economy”: after fiscal revenue and proceeds from government bond issuance enter the treasury, they can only be disbursed in accordance with regulations once budget arrangements and project progress conditions are met; after payments are made to enterprises, households, or relevant entities, the funds are gradually reflected in economic activity and physical workload through government consumption, improvement of corporate cash flows, and project construction and delivery.
Due to institutional arrangements and the behavioral patterns of government departments, the flow of fiscal funds shows strong seasonal characteristics, he noted, pointing out that under the general public budget, quarterly concentrated filing of major taxes such as corporate income tax and the annual final settlement lead to a large inflow of funds into the treasury at the beginning of each quarter, while expenditures tend to accelerate at the end of quarters and the fiscal year, as governments and budgetary units at all levels typically speed up project settlement and complete annual budget spending schedules at these junctures.
“Data show that from revenue collection and treasury accumulation to actual fiscal expenditure, there is typically a lag of about one to two months, and from fund disbursement to the formation of fixed-asset investment and physical workload, a further three to five months are often needed,” the economist said, adding that there is an objective transmission process between fiscal stimulus and improvements in economic data, and policy effects usually lag noticeably behind the pace of fiscal expansion.
The current phase of fiscal fund accumulation, Tao stressed, is not a matter of “no money on the books,” but of “rigorous procedures, with some projects yet to meet the conditions for expenditure.”
As project review standards become more standardized and under the orientation of a “correct view of political achievements,” the reserve and approval pace of new projects has become more prudent, Tao told CNS, noting the transition period of local leadership reshuffles and the intensive advancement of local government debt risk resolution have had a phased impact on project advancement and the pace of fund availability.
Notably, current investment efficiency is showing positive signals, and investment quality continues to improve, he said. According to Tao, data show that in recent years the incremental capital-output ratio, which reflects investment efficiency, has declined, indicating that the incremental capital input required per unit of economic output is decreasing and that overall investment efficiency across society has improved compared with the past.
“This change responds to external concerns about the returns on investment in China’s market and confirms that China’s investment model is gradually moving away from extensive, scale-driven expansion, with capital increasingly flowing toward areas with better returns and higher long-term value,” Tao was quote as sayjng by CNS, adding that as the efficiency of fiscal fund use improves and the quality of the project pipeline gets better, corporate cash flows, orders, and profit expectations are expected to gain support, and the capital market will likewise obtain more stable fundamental support from the optimization of the investment structure.
The marginal pull of traditional infrastructure on aggregate economic output is transitioning smoothly, macro-level investment efficiency is in a stage of structural improvement, and the direction of investment quality optimization is already fairly clear, he noted.
Looking ahead, the building of a modern infrastructure system represented by the “six networks” is an important direction for promoting effective investment, Tao said, citing the estimations made by the National Development and Reform Commission, during the “15th Five-Year Plan” period, the combined scale of investment and construction in new power grids, urban underground pipeline networks, computing power networks, and the national water network will exceed 20 trillion yuan, with related investment this year expected to exceed 7 trillion yuan.
Such investment not only directly creates demand, but can also drive coordinated development of upstream and downstream industrial chains, promote technology application, industrial upgrading, and productivity gains, with its economic effects continuing to be released over the medium to long term, he added.
“As eligible projects advance step by step, fiscal funds flow from the treasury into project construction and are converted into concrete physical workload, and through the transmission chain of government guidance, market participation, and amplification by the financial system, they continuously improve business expectations and expand effective demand,” Tao said, noting the fact provides stronger support for the stable operation of the economy and strengthens the capital market’s confidence in the resilience and structural upgrading of the Chinese economy.
“Substantial fiscal reserves provide policy space, improved investment efficiency raises the quality of fund conversion, and the shift from old to new growth drivers opens up room for long-term returns, and together, these three factors form an important foundation for the capital market in China to remain stable and move for the better,” he told CNS.
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