China is expected to record a budget deficit equivalent to 2.3% of GDP in 2010. The situation will improve in 2011­15, as spending on emergency stimulus-related infrastructure projects (which have risen sharply in 2009-10 as the government has attempted to support economic growth during the global downturn) comes to an end. But expenditure on education, healthcare and pensions will rise substantially, in line with the government's "harmonious society" programme. Revenue growth will also remain strong as the economy continues to expand rapidly.

The government's fiscal position is not as healthy as the headline figures suggest, and concerns persist about the transparency of official data on the public finances. The extent of off-budget expenditure is difficult to quantify, and the quality of data relating to local governments in particular is in doubt. Local government finances are likely to have deteriorated as a result of recent stimulus spending, and the debt burden of the investment platforms that local governments created to channel this expenditure will become heavier in 2011-15 as interest rates rise. An even greater problem is the government's many contingent liabilities, which include the cost of pension provision and potential future losses by the state-owned banking sector.