Opinion | China’s real constraint is where to direct limited fiscal resources
With Beijing focusing on spending priorities, Asian investors and businesses must watch which provinces, sectors and state firms are favoured
I pay far less attention to China’s growth numbers today. What matters more is where fiscal capacity is flowing.
China has entered a phase where population ageing, security needs and industrial upgrading all draw on the same budget. This shift follows a structural adjustment in property. Income from land sales – once a pillar of local government finance – has fallen sharply and is unlikely to return. Balance sheets will have to be reset.
The question is no longer how much stimulus Beijing can deploy, but where limited fiscal resources are directed. This matters for both businesses and governments across Asia.
Three demands now compete for the same budget in China, and none can be deferred. First, ageing. The costs of providing healthcare, pensions and social services compound annually. Extending coverage to migrant populations improves stability but locks in higher obligations.
Second, security and resilience. Defence modernisation, energy security and supply chain redundancy now anchor fiscal planning. As China approaches the technological frontier, these become more permanent budget features rather than temporary responses.
Third, industrial upgrading. Semiconductor ecosystems, advanced manufacturing and strategic technologies require sustained state financing. These commitments strengthen capability but reduce flexibility.