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

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

Carl E. Walter

Language: English

Pages: 256

ISBN: 0470825863

Format: PDF / Kindle (mobi) / ePub


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.

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had the advantage of being a direct MOF obligation and relieved the banks of any problem-loan liabilities. Moreover, since ICBC and ABC did not receive cash, excess liquidity did not become a problem. These were the advantages to this approach, but there were also disadvantages. The details of the underlying transactions for the two banks show that this approach is another instance of pushing problems off into the distant future. Actual title to the problem loans was transferred to the

massive foreign-exchange reserves give a false appearance of wealth: at the time the PBOC acquires these foreign currencies, it has already created renminbi. Under what conditions can these reserves be used again domestically without creating even larger monetary pressures? As they are, the reserves are simply assets parked in low-yielding foreign bonds and Beijing’s ability to use them is very limited. If the MOF is content to extend the life of the AMCs, consider how much more politically

programs? It is common wisdom in China that once the window of opportunity is open, it is open for only the briefest of moments and the wise person will grab all that is possible of whatever opportunity is on offer. It is also common wisdom that when the Party takes the responsibility, the regulators will sit silently on the sidelines. Thus, in 2009, conditions were perfect for local governments to do all in their power to raise funds, with little possibility of their being blamed for financial

Keeping everyone happy: Primary-market performance In addition to the lottery arrangements that create mass feeding frenzies, the share valuation mechanism set by the CSRC explains the popularity of IPOs in China. Simply put, prices are knowingly set artificially low while demand is set high, with the result that big price jumps on listing day are virtually guaranteed (see Table 7.7). This approach also eliminates underwriting risk so that securities firms need not be concerned that their

allow the RMB to appreciate a little to defuse diplomatic tensions, but it will never make the currency freely convertible. All of the talk around the internationalization of the RMB has proven its weight in gold diplomatically, but it cannot be any more than that unless holders of the RMB are able to use it freely offshore like any other currency. Until then, “internationalization” of the yuan is simply another form of barter trade. In sum, China’s growing dependence on debt to drive GDP

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