Title: Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise
Author: Carl E. Walter and Fraser J. T. Howie
Pages: 256 pages, Hardcover
Publication Date: February 2011
Published by John Wiley & Sons (Asia) Pte. Ltd.
With Wall Street and Europe in crisis and China strongly positioned as America’s largest creditor, the question on the tip of everyone’s tongue is: “Will China surpass US as the world’s premier global economy?” While China has ostensibly cornered the market in US currency, treasury and agency bonds and pushes full steam ahead in a seemingly unstoppable rise on the global stage, what undergirds its financial edifice is a fragile banking system that threatens to undermine its sustainability and success.
This forms the main vein of the timely new book, “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise” (ISBN: 978-0-470-82586-0; John Wiley & Sons) by Carl E. Walter and Fraser J.T. Howie. Throwing light on China’s financial labyrinth, the book traces how the Chinese government reformed and modeled its financial system in the 30 years since it began engaging with the west.
Looking forward, Red Capitalism makes a penetrating analysis of how the government’s response to the global financial crisis has created a banking system the stability of which can be maintained only behind the walls of a non-convertible currency, a myriad of off-balance sheet arrangements with non-public state entities and the strong support of its best borrowers – the politically potent National Champions – who are the greatest beneficiaries of the financial status quo. China’s financial system, as such, is not a model for the west and indeed not a sustainable arrangement for China itself as it seeks increasingly to assert its influence internationally.
“Understanding how China has built its own version of capitalism is fundamental to understanding the role China will play in the global economy in the next few years,” said the authors. “While the overall economics of China’s current predicament is well understood by international economists, the institutional arrangements underlying its politics and economics and their implications are far less understood. This book is about how institutions in China’s financial sector – its banks, local-government “financing platforms,” securities companies and corporations – affect the country’s economic choices and development path, and what this means for the rest of the world eagerly watching China.”
Carl E. Walter
has worked in China's financial sector for the past 20 years and has actively participated in many of its 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 held a senior position in 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 and financial institutions. More recently, he helped build one of the most successful and profitable domestic security, risk and currency trading operations for a major international investment bank. Fluent in Mandarin, he holds a PhD from Stanford University and a graduate certificate from Beijing University. Carl is a long time resident of Beijing.
Fraser J. T. Howie
has been trading, analyzing and writing about Asian stock markets for nearly 20 years. During that time he has worked in Hong Kong, trading equity derivatives at Bankers Trust and Morgan Stanley. After moving to China in 1998, he worked in the sales and trading department of China International Capital Corporation followed by a stint with China M&A Management Company.He is a regular commentator on China and its financial system having spoken in Hong Kong, Tokyo, Beijing, Shanghai, Singapore and Cambridge.He is currently a Managing Director at a leading Asia-Pacific brokerage firm in Singapore helping international investors invest in both the Indian and Chinese markets.
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