Commentary: China Has Space for Bold Fiscal Expansion

China’s policy efforts should focus on developing the economy above all else. In this vein, the country needs to boldly implement an expansionary fiscal policy, unconstrained by the traditional 3% ceiling on the fiscal deficit-to-GDP ratio.

Major economies tend to focus on a single goal when tackling their economic problems. For example, Japan has implemented quantitative easing to address deflation. Although the currency depreciated, the deflation problem was eased. Similarly, the U.S. focused solely on bringing down inflation, even if high interest rates dragged on economic growth.