China’s broad fiscal spending slumped in October by the most since at least 2021, crippling a key driver of investment and economic growth.

Data from the Ministry of Finance showed that the country spent 2.37 trillion yuan ($334 billion) across its two main budget accounts, with the total being 19% lower than the same month a year ago.

Goldman Sachs took the numbers and said its own measure, the “augmented fiscal deficit,” shrank in October. The bank told clients that the report showed budget policy had “turned less supportive of growth.”

The timing lined up with broad weakness across the economy, where weak demand at home and abroad had already slowed activity.

Investment, which is pushed forward by government spending, fell in October in a way not seen before. It added another drag at a moment when China was already dealing with soft consumer spending and poor export demand.

Government moves cash toward debts, not projects

Goldman economists, including Lisheng Wang, wrote that the latest figures suggest that more of the money the government did spend went into paying off corporate debts instead of building new investment projects.

They said this shift hurt fixed-asset investment growth and pulled down the headline numbers even more. Their note pointed out that the slowdown in spending growth was clear and that it hit investment hard.

The data also showed that the new stimulus rolled out since late September had not yet made a difference. The government had announced 500 billion yuan in new policy financing tools to boost investment, but officials said that money was not fully deployed until the end of October.

On top of that, Beijing signed off on another 500 billion yuan in special local government bond quota in mid-October. Only 40% of that quota could be used by provinces to fund real projects.

The rest was off-limits. This suggested that the government wanted to keep debt risks in check, especially since officials believed the growth target of around 5% for 2025 could be reached.

Michelle Lam, a Greater China economist at Societe Generale, said policymakers seemed confident in the economic outlook for next year and believed the stimulus already announced would help them hit this year’s growth target.

She said that markets were now looking toward 2026 for fresh fiscal support.

For the first ten months of the year, China’s broad government expenditure reached 30.7 trillion yuan, but the growth rate slowed to 5.2%.

Government income rose only 0.2% to 22.1 trillion yuan during the same period. That combination pushed the broad budget deficit to 8.6 trillion yuan, more than 20% higher than the deficit during the same period last year.

Goldman economists said the government’s recent caution on spending may show that officials want to save policy room for early next year so they can protect growth and jobs when needed.

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