Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise
Carl E. Walter
The truth behind the rise of China and whether or not it will be able to maintain it
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.
Given Wang Qishan’s experience in having to answer an angry Premier’s questions about GITIC’s black hole, one can imagine the pressure people at the MOF must have felt as they sought to come up with a figure that would satisfy Premier Zhu. There was, of course, no time for a real audit, but someone was clever enough to come up with a number purportedly sufficient to raise bank capital adequacy to eight percent of total assets, in line with the Basel Agreement on international banking
epitome of financial practice and wisdom. This American model and the vigorous efforts of the bank regulator and other market-oriented reformers to channel Chinese financial development within its framework immediately lost all credibility. But there was nothing to take its place. The banks, suddenly without restrictions, not only went on their famous lending binge, but also sought to grab as many new financial licenses as possible. As one senior banker said: “No one knows what the new banking
exchange at this time, and the financial-futures product was eliminated and remains so. Soon thereafter, Beijing took over control of both securities exchanges. Shanghai was most definitely the loser in this battle. In this zero-sum game, someone had to be the winner and, of course, it was the MOF. China Development Trust was rated the top broker on the Shanghai exchange for 1995 “due to its massive trades in treasury bond futures . . . accounting for 6.8 percent of total annual exchange
holding some 46 percent of these securities. FIGURE 4.11 Investor holdings of debt securities, by issuer, October 31, 2009 Source: China Bond Note: Non-state investors include foreign banks, mutual funds, and individuals. In the international markets, banks also dominate underwriting and trading, but investors and their beneficial owners are, of course, far more diverse, with large roles being played by mutual and pension funds as well as insurance companies. In China, such
their decisions for both shareholders and bond investors; in short, the full international capital-markets model. To create this possibility, in 2005, in the midst of collapsed domestic stock markets, the PBOC leveraged a regulatory loop hole defining “corporate bonds”7 as those with maturities above one year. It used this definition to create a short-term debt product, commercial paper (CP; duanqi rongziquan ), that quickly became the debt product of choice among SOEs. In 1993, the PBOC had