Global financial markets have been rallying after a difficult few months. Oil prices have bounced back to around $40 a barrel and iron ore prices rose by nearly 20% on a single day in March. Partly driving these gains are expectations that fresh fiscal stimulus in China will help to lift demand in the world's second-largest economy.
Claims that China is set to embark on fiscal stimulus do not stand up to close scrutiny, however. At the recent meeting of the country's legislature, Premier Li Keqiang did reveal that the government this year is targeting a bigger fiscal deficit, equivalent to 3% of gross domestic product. This compares with a published deficit of 2.4% in 2015 and, if realized, would mark the widest official shortfall since 1979. The government wants economic expansion to reach 6.5-7% in 2016.
