Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise, Revised Edition
How did China transform itself so quickly? In Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise, Revised Edition Carl Walter and Fraser Howie go deep inside the Chinese financial machine to illuminate the social and political consequences of the unique business model that propelled China to economic powerhouse status, and question whether this rapid ascension really lives up to its reputation.
All eyes are on China, but will it really surpass the U.S. as the world's premier global economy? Walter and Howie aren't so certain, and in this revised and updated edition of Red Capitalism they examine whether or not the 21st century really will belong to China.
- The specter of a powerful China is haunting the U.S. and other countries suffering from economic decline and this book explores China's next move
- Packed with new statistics and stories based on recent developments, this new edition updates the outlook on China's future with the most cutting-edge information available
- Find out how China financed its current position of strength and whether it will be able to maintain its astonishing momentum
Indispensable reading for anyone looking to understand the limits that China's past development decisions have imposed on its brilliant future, Red Capitalism is an essential resource for anyone considering China's business strategies in today's extremely challenging global economy.
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
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
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
Select Bibliography 249
Carl E. Walter lived in China for twenty years and actively participated in numerous financial reforms. He played a major role in China's groundbreaking first overseas IPO in 1992, as well as the first listing of a state-owned enterprise on the New York Stock Exchange in 1994. He was a member of the Management Committee at China International Capital Corporation, China's first and most successful joint venture investment bank, where he supported a number of significant domestic stock and debt underwritings for major Chinese corporations. More recently, he helped build one of the most successful and profitable domestic security and currency trading operations for a major global investment bank. Fluent in Mandarin, he holds a PhD from Stanford University and a graduate certificate from Beijing University. He currently lives in New York where he acts as an independent consultant.
Fraser J. T. Howie studied Natural Sciences (Physics) at Cambridge University and Chinese at Beijing Language and Culture University. For nearly twenty years he has been trading, analyzing, and writingabout Asian stock markets. During that time he has worked in Hong Kong, trading equity derivatives at Bankers Trust and Morgan Stanley. After moving toChina in 1998, he worked in the sales andtrading department of China International Capital Corporation followed by a stint with China M&A Management Company. He has contributed to the SCMP, AWSJ, China Economic Quarterly,and China Economic Review as well as being a regularChina commentator on CNBC, BBC, Al Jazeera, and Bloomberg. Currently, he is a Managing Director at a leading Asia Pacific Brokerage firm in Singaporehelping international investors invest in both the Indian and Chinese markets.
Named A Best Book Of The Year By The Economist
Authors Carl Walter and Fraser Howie tell the story of China’s incredible ascension, how it got to where it is now, and what the future holds in the second edition of ‘Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise, Revised Edition’.
‘Red Capitalism, Revised Edition’ explores how China's financial institutions—from banks to corporations—with emphasis on the national Communist Party, shape the country's economic choices, development, and reform. With new and expanded coverage of China's "Big 4" banks; why assigning credit ratings is still a problem; the rapid growth of Chinese national debt; and more, it examines whether or not the twenty-first century will belong to China, calling into question the sustainability of the current system. The authors go deep inside the Chinese financial system to illuminate the social and political consequences of the unique business model that has transformed the country into an economic powerhouse and investigate whether the incredible gains of the last thirty-plus years really live up to their reputation.
In contrast to the common view of China as an unstoppable freight train of growth, ‘Red Capitalism, Revised Edition’ shows how the country's decades of development have been marked not by steady ascension but rather an ongoing series of booms and busts that many corporations would not have been able to weather without large-scale government intervention.
The authors argue that we should take comfort that China’s economic system is no worse than the West’s. While they have analyzed aspects of the balance sheet quality of China’s major banks, this book is not meant to be a substitute for the work of a good bank analyst. Their objective is to show how China’s banks, all majority-owned and controlled by the Party, are part of a larger system. ‘Red Capitalism, Revised Edition’ is indispensable reading for anyone looking to understand the limits that China's past development decisions have imposed on its promising future.
The Fragile Financial Foundation of China's Extraordinary Rise, Revised Edition
By Carl Walter and Fraser Howie
Published by Wiley; February 2012
Format: Hardcover; 300 pages; US$29.95
For more information, explore: www.wiley.com/buy/9781118255100.
Buy Both and Save 25%!
Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise, Revised Edition (US $29.95)
-and- Enough: True Measures of Money, Business, and Life, Revised Edition (US $14.95)
Total List Price: US $44.90
Discounted Price: US $33.67 (Save: US $11.23)