Fiscal policy in China from the perspective of the government balance sheet

W. Raphael Lam and Marialuz Moreno Badia

Chapter 5 in Handbook of Public Finance in China, 2026, pp 81-105 from Edward Elgar Publishing

Abstract: This chapter introduces a framework to compile China's government balance sheet following the statistical principles set out in the IMF Government Finance Statistics Manual. Using this framework, we present a comprehensive estimate of China's government balance sheet, assessing the role of fiscal policy and the evolution of the public sector financial health over the two decades leading up to the COVID-19 pandemic. Overall, the chapter finds that China's stock of financial assets is large by international standards. However, its net financial worth as a percentage of GDP has declined since the global financial crisis due to shortcomings in the intergovernmental fiscal system along with high leverage and falling profitability among state-owned enterprises. This analysis demonstrates that the government financial balance sheet provides deeper insights into the role of fiscal policy in the Chinese economy than traditional budgetary aggregates.

Keywords: Balance sheet; China; Debt; Deficit; Local government; State-owned enterprises (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035311705
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