[War] PRC: "Growing Pains"

[Michael Downey]

"Growing Pains"
President Xiao Wu
People's Republic of China
28 April 2006
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"Of all the problems our economy could face, too much growth is not
something I expected," chuckled Wu as he sipped his tea. Premier
Kwencho seemed to find the situation just as ironic. Finance Minister
Quan Tesh furrowed his brow.

"We want our trains to move quickly," said Tesh, putting the situation
into perspective. "But if it moves to fast it will fly of the track."

"I am aware of how economics work, Minister," said Wu in an assuring
tone. Some politicians in China still had a very communist, and thus
very flawed, view of economic systems. Wu, like the majority of
Chinese 'communists', had long ago abandoned Marxism and embraced a
capitalism.

Wu was concerned that debt spending would soon increase among China's
growing middle class, and production might outstrip both foreign
demand and domestic consumption. The Western nations had learned the
hard lessons of such a situation in the 1930's. A student of history,
Wu was not about to let the same troubles befall China.

"Though some in the State Council have been reluctant to do so, we
must raise interest rates to cut down on lending and debt spending,"
said Tesh. "I would also suggest a tax hike to take some steam out of
the manufacturing sector. Perhaps a hundred billion US dollars. That
is not very much, considering the breakneck pace of growth has raised
the GDP to over eight trillion, but it would slow things down just
enough that growth is not progressing dangerously."

"A hundred billion dollars could also prove very useful for us right
now," noted Kwencho. "We could eliminate the state deficit and still
have..." he quickly did the math. "Sixty eight billion dollars left
over."

Wu considered all the things they could do with that kind of money. He
certainly was not going to put all of it into the military, but the
PLAN wanted new destroyers for their fleet. Not just second hand Red
Navy ships purchased from the Russians, but newly constructed
warships.

Then there was the deployment of troops to Sudan, and the offer to
deploy troops and donate equipment to Iraq. That would certainly cost
a fair amount, though Wu did not believe the Americans would be upset
about that kind of military spending.

Then there was his agricultural initiatives, and the health care
system could always use more financing. So many possibilities.

"I will authorize raising interest rates by 2%," said Wu. "As well as
the new tax. Pay of the deficit, record the rest as a budget surplus
until we have had more time to decide what to do with it."
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Actions:
1) Increase interest rates in China by 2%
2) Impose a $100 billion USD tax on the manufacturing industry.