China: Fiscal revenue growth slowed in September, while spending remained subdued; lowering our 2026 full-year AFD forecast

On-budget fiscal revenue growth fell to -0.1% yoy in September from +4.7% yoy in August, driven mainly by slower tax revenue growth. On-budget fiscal expenditure growth remained subdued at 0% yoy in September (vs. -0.1% yoy in August), although it improved modestly in sequential terms. Property-related government revenue worsened in September, with land sales revenue contracting 23.5% yoy. Combining on-budget and off-budget financing channels, our proprietary “augmented fiscal deficit” (AFD) metric narrowed further in September on both a 3-month and 12-month moving average basis, suggesting that fiscal policy remained a growth drag despite recent modest easing measures introduced since end-September. After flagging downside risk for several months, we lower our 2026 AFD forecast to 10.0% of GDP from 11.5% previously, reflecting year-to-date fiscal data and delayed easing this year.