Fiscal policy will remain proactive to boost demand

Editor's note: China will continue to implement a more proactive fiscal policy in 2026, summarized as expanding the total volume, optimizing the structure, enhancing efficiency and strengthening momentum by the Ministry of Finance on Tuesday. China Central Television spoke to Shi Yinghua, director of the Chinese Academy of Fiscal Sciences' Research Center for Macroeconomics, on advancing high-quality economic development. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

Fiscal expenditure is set to increase in 2026 to provide a solid backing for economic development in the opening year of the 15th Five-Year Plan (2026-30). Spending priorities are expected to focus on fostering new quality productive forces, including stronger support for technological innovation and emerging growth drivers. Greater emphasis will also be placed on investing in human capital and promoting overall human development.

China's population age structure and regional distribution continue to evolve, and government spending needs to adjust to these demographic changes. There is considerable room to further improve the allocation of fiscal resources. Aligning expenditure more closely with real and evolving needs will ensure that resources are directed to where they are needed most.

Increasing domestic demand and boosting investment growth are clear priorities. Lowering investment thresholds and having the government share the investment risks will help mobilize more private and social capital.

Through the coordinated use of fiscal and financial tools, public funds can play a leveraging role, amplifying their impact and driving greater participation from the broader market.

Encouraging investment by private capital, particularly among small and medium-sized enterprises, is critical. A key condition for stimulating investment is ensuring reasonable returns on investment.

The ministry will roll out a loan interest subsidy policy for micro, small and medium-sized enterprises. Interest subsidies will be set at 1.5 percentage points per year, with a maximum subsidy period of two years. The loan amount eligible for subsidies will be capped at 50 million yuan ($7.18 million) per borrower, with the maximum interest subsidy per borrower set at 1.5 million yuan. This policy should significantly enhance the expected returns for enterprises. In this sense, such measures are positive policy signals because they effectively support the expansion of demand.

Expanding domestic demand is a long-term national strategy rather than a short-term response to the current situation. Its sustained implementation requires not only strong policy support but also deeper reforms. To promote sustained growth in consumption, policies must support rising household incomes while encouraging innovation in consumption scenarios.

Supply and demand reinforce each other. In practice, new forms of supply can create new demand, and vice versa. As technology advances and new business models, services and products emerge, they generate fresh consumer needs. At the same time, new demand requires the upgrading of supply, leading to further innovation and expansion.

Consumption is a crucial anchor for economic growth and also generates sustained momentum. Ensuring and expanding employment, creating more jobs, improving job quality and enhancing overall employment conditions are essential to provide a solid and lasting basis for rising incomes.

A significant portion of the annual fiscal expenditure is devoted to people's livelihoods. By advancing policies in these areas in a coordinated manner, China will be better positioned to promote sustained growth in residents' incomes, which in turn will support high-quality economic development.