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China seen as leaning toward debt cleanup, with limited H2 fiscal support

TD Securities expects local governments to prioritize debt clean-up over growth, with H2 support likely capped unless 2026 GDP growth falls toward 4.0% to 4.2%.

Reported · Written up by our desk · Central Banks

TD Securities’ senior Asia economist Alex Loo said China’s fiscal stance is shifting toward austerity, as local governments focus on debt clean-up rather than boosting growth, according to FXStreet.

The report expects only limited fiscal support in the second half of 2026 unless GDP growth slips toward 4.0% to 4.2%, versus TD Securities’ 4.6% forecast. It also said major fiscal stimulus is unlikely to be the policy tool unless growth weakens toward that range.

Instead, the analysis points to support via faster infrastructure execution, modest easing from the People’s Bank of China, and continued conservative budgeting from the Ministry of Finance, with policy more geared toward implementation speed than new spending packages.

FXStreet added that a weak Q2 GDP print in the low-4% range next week could prompt market speculation about additional stimulus from authorities.

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