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Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise Hardcover – 23 Mar 2012
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From the Inside Flap
In the space of just a few short decades, China has transformed itself from a nation scarcely able to cover the cost of sending its highest–ranking dignitary to speak at the UN to one with financial reserves numbering trillions of dollars. In Red Capitalism: The Fragile Financial Foundation of China′s Extraordinary Rise, Revised Edition, Carl Walter and Fraser Howie, experts in Chinese finance, tell the story of China′s incredible ascension, how it got to where it is now, and what the future holds.
Exploring how China′s financial institutions from banks to corporations and most importantly, the national Communist Party, shape the country′s economic choices, development, and reform and what this means within China and for the rest of the world, the book examines whether or not the twenty–first century really will belong to China, calling into question the sustainability of the current system. Going deep inside the Chinese financial machine to illuminate the social and political consequences of the unique business model that has transformed the country into an economic powerhouse, Walter and Howie investigate whether the incredible gains of the last thirty–plus years really live up to their reputation.
While China has seemingly adopted a Western style of economic and commercial growth complete with stock–listed corporations and a growing class of accountants, lawyers, and investment bankers the reality is that China remains a Communist country, one in which the state can and frequently does step in to save struggling industries. In contrast to the common view of China as an unstoppable freight train of growth, Red Capitalism 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.
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, this fully revised edition of Red Capitalism is indispensable reading for anyone looking to understand the limits that China′s past development decisions have imposed on its promising future.
From the Back Cover
Praise for Red Capitalism
"The most important financial book of the year." James Grant Editor, Grant′s Interest Rate Observer
"Red Capitalism peels back the faÇade 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.
"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 its economy and financial system are not fully equipped to support such aspirations." Financial Times
"This book allows us to further deepen our analysis and prepare for the tumultuous events which impend." Socialism Today
"Walter and Howie possess a rare depth of experience in the analysis of the Chinesefinancial sector. Their hard–hitting conclusions,based on a wealth of empirical research, will stimulate debate about the future of theChinese financial system at a critical point in its evolution." Peter Nolan Sinyi Professor of Chinese Management, Cambridge Judge Business School, University of Cambridge
"Concise and erudite, Red Capitalism is a fantastic deep dive into China′s structurally flawed financial system." China Economic Review
"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 splutter out, 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
"Red Capitalism is an important addition to the reading list of any China–watcher." The Hindu
"Red Capitalism is a superb guide to China′sfinancial labyrinth. It′s a must–read for anyone who wants to understand the sources ofChinese economic power, and the threat posed by the nation′s vast hidden debts." Arthur Kroeber Editor, China Economic Quarterly
NAMED A BEST BOOK OF THE YEAR BY THE ECONOMISTSee all Product description
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Thoroughly documented with primary sources and utilizing an extensive arsenal of dizzying acronyms of state organizations, there's no doubt these guys have their facts straight. But for the uninitiated to the Chinese economy, the overwhelming number of acronyms poses a challenge; thankfully there is a glossary provided for just this reason. When the reader is finally able to get past the incalculable number of players in this economic shell game, the narrative unfolds nicely.
Although reformers such as Deng Xiaopeng and Zhu Rongji have made measurable strides in the direction of reform, the character of the Chinese markets remains the same as always: closed, internally focused, yet now more savvy to the benefits of global capitalism combined with strategic and limited foreign investment.
One of the most enlightening examples of the nature of Chinese markets is that of valuation of equities. Since the scope of permitted investors is limited by government controls, and in the case of many corporations the majority shareholder of a given equity on the market is a state owned entity, market caps don't follow traditional norms for valuation. Chinese corporations can't be valued by free market standards, because they are not controlled nor "owned" by the true players in the free market. And in most cases capital raised internationally or domestically is managed by the government or their proxies to supply resources to local governments and favored corporations in the manner of a "public utility" for money.
My final take? China is more leveraged in the red (no pun intended) than the US ever has been. Central Planning is banking on current dividends and worldwide financial speculation with China as the new "Wild West." With imminent social demands and rapidly changing labor demographics, there may just be a meltdown in the making. So as the Romans would say, "Caveat emptor," as regards investors in this market - but certainly not regarding the purchase of this book.
As for follow up reading, a better understanding of Zhu Rongji and Deng Xiaopeng would be useful to painting a more holistic picture of the modern Chinese economy, and there are a number of excellent biographies available on the two men.
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