Recently, the authoritative figure from the central bank suggested for the first time that

China has room to increase fiscal deficit to 5% of GDP.

The research team at ANBOUND Consulting is of the view that central government will continue to pursue a proactive fiscal policy and expand its fiscal deficit; the fiscal deficit target of 3 per cent is a high probability event.

The development of the economic situation will be the primary factor in deciding the pace and rhythm in deficit expansion.

There is no doubt that the proactive fiscal policy will succeed the loose monetary policy.