Red Capitalism

The Fragile Financial Foundation of China's Extraordinary Rise

Walter, Carl / Howie, Fraser

1. Auflage März 2012
288 Seiten, Hardcover
Wiley & Sons Ltd

ISBN: 978-1-118-25510-0

John Wiley & Sons

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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.

Preface to the Second Edition xi

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

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.