Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise: Amazon.co.uk: Carl E. Walter, Fraser J. T. Howie: Books

Review

“...China is bent on superpower rivalry; reserve currency status for the renminbi is a glint in the party’s eye. Red Capitalism puts a powerful case that [China’s] economy and financial system are not fully equipped to support such aspirations.”
– Financial Times, January 2011

“So pervasive has this view [that the 21st century is China′s for the taking] become that any effort to examine whether it′s actually true comes as a breath of fresh air. "Red Capitalism" is such a work. Authors Carl E. Walter and Fraser J.T. Howie, both investment bankers, argue that China isn′t so different from other economies nor so immune from normal economic laws as cheerleaders argue. An examination of the financial system—or "how China′s political elite manages money and the country′s economy," as the authors put it—offers a useful lens through which to view much broader issues.”
– The Wall Street Journal, January 2011

“[The authors’] ongoing research is an indispensable resource for those seeking the reality behind the often nauseating and sycophantic hyperbole surrounding China’s capital markets.”
– China Economic Quarterly, December 2010

“In their new book, "Red Capitalism: The Fragile Financial Foundation of China′s Extraordinary Riser Carl E. Walter and Fraser IT. Howie paint a troubling portrait of the Chinese economy and financial system. Despite the nation′s mind–boggling growth and images of gleaming skyscrapers and luxury cars, the authors say the Chinese growth model is flawed and fragile, and they warn about substantial risks accumutating in its banking system.”
– The New York Times & International Herald Tribune Asian edition, January 2011

“If Walter and Howie are right, China may be approaching a period when it can no longer hide the systemic flaws in its banking system; the more profound and problematic question the authors of Red Capitalism want their readers to ask is what this means for China as a whole. The answer will likely impact not just the Chinese, but people around the world as well.”
– Asia Times Online, January 2011

The most important financial book of the year."
— James Grant, editor, Grant′s Interest Rate Observer

“Red Capitalism peels back the facade of China′s economy and reveals how the dominant role of the state has led to enormous financial leverage and endemic malinvestment. China′s major role in the global economy makes Red Capitalism required reading for any financial industry fiduciary.”
— Mark L. Hart III, Chairman, Corriente Advisors, L.L.C.

‘Anyone who is overly impressed with the apparent resilience of China today would do well to read [this] book’ (The Economist, December 2010).

‘…an impressive wealth of analytical detail and political nous’. (FT, January 2011).

‘An eye–opening look at how Communist Party bosses control China′s economy.’ (Independent.ie, June 2011).

Review

Carl Walter and Fraser Howie debunk a number of common myths about China′s financial markets in this excellent new book. Investors stuffing their portfolios with China stocks would be wise to heed their warnings on the fragile foundations of China′s banking system. The authors have done their homework, digging beneath the surface of China′s financial world to reveal uncomfortable truths about a financial system riddled with hidden landmines that threaten to undermine China′s hard fought economic success in the years ahead.
––Rick Carew, Former Asia M&A Reporter, The Wall Street Journal
In Red Capitalism, Carl Walter and Fraser Howie give a powerful, albeit controversial explanation of the fragile underpinnings of the financial edifice that financed the seemingly unstoppable rise of China on the global stage–which is all the more persuasive thanks to their careful mining of the data. Their thesis that China has the trappings of a market system but not the substance should be considered by anyone dealing with or investing in China–categories which embrace most of the world today. Their contention that China ultimately is a "family business" explains much that is puzzling to outsiders.
––Henny Sender, Chief Correspondent, International Finance, Financial Times
Red Capitalism is a superb guide to China′s financial labyrinth. It′s a must–read for anyone who wants to understand the sources of Chinese economic power, and the threat posed by the nation′s vast hidden debts.
––Arthur Kroeber, Editor, China Economic Quarterly
Finally, a way into the world′s most important and least understood financial system. For insight into how China′s economy actually operates, begin here!
––Thomas Easton, Asia Business Editor, The Economist
A penetrating analysis that demonstrates how hard it is to follow the old adage "follow the money", and how rewarding it is to understand what will really drive China into the future.
––Christian Murck, President, American Chamber of Commerce in China
Walter and Howie put the Chinese financial system under the microscope to examine how an absence of leadership, institutional squabbling and complacency have seen appetites for reform sputter out, and replaced by stagnation and dysfunction. Theirs is a fascinating, entertaining and necessary corrective to the hyperbole surrounding China′s seemingly–miraculous rise.
––David Wilder, Beijing Bureau Chief, Market News International
Walter and Howie′s penetrating study addresses a critically important issue in China′s political economy. They possess a rare depth of experience in the analysis of the Chinese financial sector. Their hard–hitting conclusions, based on a wealth of empirical research, will stimulate debate about the future of the Chinese financial system at a critical point in its evolution.
––Peter Nolan, Sinyi Professor, Judge Business School, University of Cambridge

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11 of 11 people found the following review helpful

Essential reading 25 Jun 2011

By Faulkner

Format:Hardcover

In many ways, China is an amazing place but serious thought needs to be given to its strange hybrid Communist/Capitalist economy that appears (for the moment) to be defying gravity and rewriting economy theories. Finally, somebody has written the book about the extremely suspect underpinnings of the modern Chinese economic miracle.

Admittedly this is not a book for a general population but it is essential reading for anybody who is thinking of putting their hard earned capital to a 'Chinese themed' investment which runs from EM equities, commodities to even Western auto or luxury goods manufacturers. It is also a book for anybody, like me, who when visiting China doesn't stand in awe of of the new buildings, airports or roads but rather wonders 'How are they paying for this?' or 'Who is going to use this?'.

Despite the complex subject matter the book is written in a lucid and engaging style. It is very well researched and manages to capture the various politics, economics and accounting involved with how the Chinese banks are managed. Ultimately, the book shies away from delivering really hard hitting conclusions other than 'there is likely to be trouble ahead', there again the PRC doesn't like criticism. For those that are interested, I couldn't recommend this book more.

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8 of 8 people found the following review helpful

The inside story of China's financial system 17 Aug 2011

By J. A. Garlick

This is essential reading for anybody who wants to know what is really going on inside China's financial system, and why surface appearances (as usual in China) do not represent the whole of the underlying reality. One of the authors' main points is that the Chinese have adopted the features of a Western capitalist system (e.g. a stock market, shares, privatisation, etc.) in order to attract investment, but that these trappings do not reveal the true movements of capital within the system, or the interests that the capital serves. Basically, in China everything is underwritten and owned by the state or its proxies, even if this doesn't appear to be so officially. What looks like a successful company might turn out to be a debt-ridden shell, and you can't get anything done without the say-so of the Party.

Note that the authors have lived and worked in China for approximately 20 years, so know the Chinese financial system inside-out.

4 of 4 people found the following review helpful

Red Capitalism 13 Oct 2011

By Rolf Dobelli TOP 500 REVIEWER

This insider's report on China's version of capitalism tells a revealing story about an economy that is poised to become the world's largest. Asia banking experts Carl E. Walter and Fraser J.T. Howie expose the interconnections of a financial system dominated by the Communist Party; the conflicts among ruling families, corporate executives and technocrats - each vying for political and personal gain; and the challenges opaque, state-run companies present to Western investors. The authors delve into the byzantine, often clandestine machinations behind the modern and sophisticated screen China presents to the rest of the world. The book provides a detailed account of major players, agencies and policies, as well as an advanced-level financial analysis of the banking and capital market sectors. The book's most interesting points sometimes bog down in historical details, but patient readers reap rewards. getAbstract recommends this extraordinary behind-the-scenes look to those who want to know what's really driving China's dazzling growth. Surprisingly, this is a story most people do not know.