Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise, Revised Edition

Preface to the First Edition xvii

List of Abbreviations xxi

1. Looking Back at the Policy of Reform and Opening  1

Thirty years of opening up: 1978–2008  2

Thirteen years of reform: 1992–2005  10

The end of reform: 2005  15

China is a family business  22

2. China’s Fortress Banking System  27

Banks are China’s fi nancial system  29

China’s banks are big banks  31

Crisis: The stimulus to bank reform, 1988 and 1998  33

China’s fortress banking system in 2010  41

The sudden thirst for capital and cash dividends, 2010  47

3. The Fragile Fortress  53

The People’s Bank of China restructuring model  56

The Ministry of Finance restructuring model  66

The “perpetual put” option to the PBOC  73

The new Great Leap Forward Economy  76

China’s latest banking model  82

Valuing the asset management companies  85

Implications  88

4. China’s Captive Bond Market   95

Why does China have a bond market?  98

Risk management  102

The base of the pyramid: Protecting household depositors  116

5. The Struggle over China’s Bond Markets  125

The CDB, the MOF, and the Big 4 Banks  126

Local governments unleashed  134

Credit enhancements  141

China Investment Corporation: Linchpin of China’s financial system  145

Cycles in the fi nancial markets  158

6. Western Finance, SOE Reform, and China’s Stock Markets  163

China’s stock markets today  164

Why does China have stock markets?  168

What stock markets gave China  172

7. The National Team and China’s Government  185

Zhu Rongji’s gift: Organizational streamlining, 1998 186

How the National Team, its families, and friends benefit  196

A casino or a success, or both?  209

Implications  212

8. The Forbidden City  215

The Emperor of Finance  217

Behind the vermillion walls  220

An Empire apart 227

Have the walls been breached?   231

Cracks in the walls  235

Imperial ornaments  239

Appendix  245

Select Bibliography  249

Index  251