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Editorial Reviews. pyzavumanaco.tk Review. Q & A with the authors of Red Capitalism, Revised Deliver to your Kindle or other device. Enter a promotion code or Gift Card · Share. Kindle App Ad. Look inside this book. Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise by [ Walter, Carl.
Table of contents
- Book Chat: A Conversation With Carl Walter - The New York Times
- Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise
- Fraser Howie
Find it at other libraries via WorldCat Limited preview. Bibliography Includes bibliographical references p.
Contents Chapter 1: "One short nap took me all the way back to before ". China is a family business. Chapter 2: China's fortress banking system. Banks are China's financial system. Crisis and bank reform, and China's fortress banking system in The sudden thirst for capital and cash dividends, Chapter 3: The fragile fortress. The foundation of China's banking machine. Bad bank performance and its implications, The "perpetual put" option to PBOC.
China's new post-Lehman Brothers banking model. Chapter 4: China's captive bond market. Why does China have a bond market? Yield curves in China. The base of the Pyramid: "protecting" household depositors. Chapter 5: The struggle over China's bond markets. Local governments unleashed. China Investment Corporation: the lynchpin of China's financial system. Cycles in China's financial markets. Why does China have stock markets? What the stock markets gave China. Chapter 7: The National Team is China's government. Chinese stock markets: Who benefits?
A casino or a success or both? Chapter 8: The Forbidden City. The Emperor of Finance. Behind the vermillion walls. Red capitalism means leverage. Already, the tsunami of lending and high dividend payouts have stretched bank capital-adequacy ratios and forced the need for more capital, which comes largely from the state itself.
It is somewhat ironic that the demand for capital can also be mitigated by reducing loan assets, ensuring that the AMCs will continue to play a central role. There is a further important aspect to this arrangement. If the government does seek to replace export demand with domestic consumption, this suggests that the domestic savings rate will decline, as will household deposits. What will happen to the banks then? What happens to bank funding if the Chinese people learn to borrow and spend with the same enthusiasm as their American friends?
From this viewpoint, a profusion of new investment and consumer-lending products appears unlikely. Similarly, this view suggests that full funding for social security is a reform whose time will not come. Finally, there is the foreign banking presence. China has largely abided by the agreement and, over the past eight years, foreign banks have invested heavily in developing networks and new banking products.
Foreign banks have also been quick to engage in the development of a market for local-currency risk-management products. These banks understand that China and its financial system are in transition and most are prepared to persist in the expectation that at some time in the not-too-distant future, the market will be open fully to them. This was the commonly held position prior to But the conclusions about the global financial crisis now being drawn by the Chinese government suggest that opening and reform along the lines of the now apparently discredited international financial model will no longer continue.
This is not to say there is another model. What future, then, is there for foreign banks in China? Ironically, however, if the Asian Financial Crisis in caused one set of Chinese leaders to see the need for true transformational reform of the financial system, the global crisis of has had the opposite effect on the current generation of leadership. Their call for a massive stimulus package reliant on bank loans may have washed away for good the fruits of the previous 10 years of reform.
In the next chapter, we see that China is prevented from having much of a bond market mostly because of price controls. This has apparently changed since , with China having the third largest bond market in the world now. Again, technical details coming here mainly serve to remind this reader that he has little idea how bond markets usually work, which is likely necessary to grasp the full import of the Chinese situation.
As time goes on, China must find newer and better ways to deal with what are apparently massive levels of bad debt, some lingering from early 80s boondoggle projects like Hainan. The story grows even more harrowing as the book moves on inexorably to the conclusion that Zhu Rongji may or may not have intended that China adopt international standards of finance and banking, but by these efforts had morphed into a highly centralized, if byzantine structure with only the trappings of modern finance: Over the past 18 years, China has developed stock and debt-capital markets, a mutual-funds industry, pension funds, sovereign-wealth funds, currency markets, foreign participation, an internationalist central bank, home loans and credit cards, a burgeoning car industry and a handful of brilliant cities.
As it looks like the West, international investors easily accept what they see; they are excited by it because it is at once so familiar and so unexpected. There is the feeling that all can be understood, measured and valued. They would not feel this way if China explicitly relied on a Soviet-inspired financial system even though, in truth, this is largely what China remains. Aug 09, Matthew rated it really liked it Shelves: business-history , economics , markets.
Red Capitalism is excellent for understanding the political and institutional history behind China's financial system. The main thesis, which is emphasized throughout by scoping in on specific parts of the system -- bank reform, A-share markets, bond markets, PBOC vs MOF relations -- is that China's capital markets are no more than shallow trappings designed to look like Western financial systems and that the older political arrangements still dominate the allocation of capital.
The authors do b Red Capitalism is excellent for understanding the political and institutional history behind China's financial system. The authors do believe that China underwent a period of genuine reform under Zhu Rongji and Zhou Xiaochuan, with the PBOC taking the lead, but that since , political power has reverted back to the MOF, which has turned the Chinese banks back into financial utilities exercised at state discretion, as evidenced by the lending binge.
Their argument is not especially new but what I appreciate is the nuance and level of detail brought to bear. An example is their explanation of the recap and listing of the big 4 banks.
Book Chat: A Conversation With Carl Walter - The New York Times
Basically the carve out of NPLs from ICBC's balance sheet was essentially a transfer of bad debt to off balance sheet vehicles to which ICBC still retains exposure but keeps rolling over , while the earlier recaps had the banks receive actual cash. The two frightening themes here are: i how the reform process is held back by political structures, ii how the system itself has changed such that much financial power is in the hands of SOEs which the central govt is increasingly less able to control e.
Yes, the book is bearish, and while the authors contend that the farce can go on for a while, they don't provide much encouragement that the farce will end. Something to think about. View all 4 comments. Sep 19, Mbogo J rated it liked it. This book is an indictment of the Chinese financial system and the short of it is that the author s think it is one giant ponzi scheme.
They check the usual boxes of debt problem, the inconvertibility of the RMB and the closed structure of ownership which is more run through politics rather than economic fundamentals. I wont fault the authors because it seems they have some good points but I have a problem with their tones.
I was looking for a sober review of China's financial system instead I g This book is an indictment of the Chinese financial system and the short of it is that the author s think it is one giant ponzi scheme. I was looking for a sober review of China's financial system instead I got a tabloid version. The story was pushing for one central narrative and only quoted evidence that supported its thesis.
The book also seems to advance the notion that anything that does not look like the west's version is bad or flawed. It fails to see that China is playing with home savings rather than bingeing on external borrowing. Sure it has its own weaknesses but so do every country and calls of China's debt coming to a reckoning have been issued for about a decade now and they are still doing fine. Xi Jinping made some off the cuff comments about these westerners who make a name out of lecturing China where he said,"There are white men with full bellies who have nothing better to do but to lecture us on how to run our country View 2 comments.
Feb 23, Daniel rated it it was amazing. The author has written an excellent book on the Chinese economy. Indeed, China has always been governed this way: a strong central government and weaker local government. The power struggle between different fractions has been there since the Zhou dynasty years ago! Having lived in China for a long time, the author really understands how the Chinese State control the banks, the industries, the bonds, the stock market.
In other words, everything. Wall Street helped Chi The author has written an excellent book on the Chinese economy. China has a huge debt problem, and the Impressive GDP growth had relied on lots of debt. Fortunately China borrowed mostly local money so is unlikely to suffer a Thailand-like crisis. A must read for anyone who has some business with China. Nov 30, Alberto rated it really liked it. Ultimately you come away with the understanding that, since the state controls all the major enterprises, the entire structure of assets and liabilities ultimately all cancel each other out.
The book does have several flaws though: 1 it assumes a solid understanding of Chinese politics - it was like reading a book on Federal Reserve policy without understanding what the President or Congres 3 or 4 stars Does a good job of explaining China's unique blend of capitalist mechanisms and state planning. The book does have several flaws though: 1 it assumes a solid understanding of Chinese politics - it was like reading a book on Federal Reserve policy without understanding what the President or Congress are or how states and DC divide power 2 abuse of acronyms, some used chapters ahead of where they are explained and others not explained at all 3 repetitious in several passages View 1 comment.
Jan 30, bookreader added it. To understand the Chinese economy, you must understand its banks, which stand behind everything. Essential reading for anyone investing in China's policy-driven markets. Oct 07, Scott rated it liked it. It's good, it really is. It's an absolute data fest and the authors go to great lengths to ensure that their ideas are backed up by real, hard numbers.
But from the get-go there seems to be a pressing desire to find some massive skeleton in China's fiscal closet and I really wish there were some opposing positions mixed in here, if only to help find context for those too ignorant to find and interpret their own international financial data. May 25, Peter rated it it was amazing. An insightful look into a financial system based on gross misallocation of capital and corruption. Aug 22, InvestingByTheBooks. Very few westerners have worked in the Chinese financial sector for twenty years.
The two writers of Red Capitalism both have. Being residents of Beijing and Hong Kong they have managed Chinese investment banks, worked in investment firms and played roles in the early IPOs of state owned companies. However, they point to the unbalanced state of local governments, state owned banks and the property market. The picture of a power house flush with cash might not be the only one. After a brief recap of the economic reforms after the death of Chairman Mao the rest of the book describes the current state of the economic and financial system.
Most of us have read about the risk of a property bubble. In my view the combination of state owned banks with close to free access to peoples deposited money and corrupt local government business entities is the really scary picture. China, to some extent, is still a commando economy. Need I say that credit control and making sure the return on invested capital is higher than the cost of capital is not really prioritized in this process? One piece of the puzzle after the other is presented: the banking system, the handling of historical credit losses they were hidden , the shadow banking system, the equity and bond markets, the local governments, the property market and the risk for coming credit losses.
In the end a picture emerges that reveals a public debt of the Chinese state close to 80 percent of GDP. Not far from the Rogoff and Reinhart danger line of 90 percent. China has huge foreign currency reserves but as long as the currency is not exchangeable these funds are of very little use inside the country.
I still think the future of China is bright but it might be a rockier ride on the way to the future than most people believe. As China is a large part of global GDP, of global trade and the country practically IS the commodity demand in the world, the imbalances the authors point to should be on every investors radar screen. Most western investors have a surprising faith in that a few elderly communist officials can steer this huge economy through any trouble and this often without really understanding the troubled waters they have to navigate through.
Not wanting to bring anything that might annoy a customs official I read the book prior to going to China a few months ago. It greatly increased the benefit of the trip. On site you mainly get the bull picture. However, most people you meet are fully prepared to discuss any worry the pessimistic foreigners might have regarding the property market or the risk of credit losses, always with the conclusion that there is little to worry about. The future is bright and shiny. Read this book. You will understand the world economy better and many of your competitors will not have read it.
Feb 21, Hardik Lohani rated it really liked it. China, the second biggest economy in the world stands on the financial faults which this book shows. There are many difficult economic and financial jargons that can be painful to go through at times for casual readers. But, the fact Chinese Communist Party using the Four big banks and the Sovereign Hedge funds as the piggy bank gives the clear indication that the economy is truly not 'free'. The AMCs setup to acquire non-performing loans on dollar-to-dollar rate basically cooking the books fr China, the second biggest economy in the world stands on the financial faults which this book shows.
The AMCs setup to acquire non-performing loans on dollar-to-dollar rate basically cooking the books from their respective banks and bankrolling them endlessly in continuation for years shows the reluctance of the party to deal with the problem effectively and leave for the future generation of leaders to deal with it. The bond markets are strictly controlled by the party and artificially maintained.
The pyramid scheme like payments of banks paying AMCs and then MOF, Banks all controlled by the party and governmental entities buying and selling bonds, notes to each other is a unique money circulation idea which ensures the liquidation but, where does the real value generates? So, standing on the debts of lending binge, artificially bankrolled AMCs with false value of NPLs, tussle between different Chinese governmental entities for supremacy, artificially low interest rate, control of banks by the party for funds and reliance of banks to the party for the capital adequacy ratio, faulted bond market and no real competition with foreign banks are the major fault lines that Chinese economy is balancing on.
Will be very interesting how longer can they keep generating capital in China hungry for cash. Aug 22, YHC rated it it was amazing. I can not pretend that i understand totally this book.
Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise
Maybe one day, i will try to read again after i know better about finance. But for those who wants to know the insight of how china's finance developed, it really offered an very good and researched data. I actually read some reviews that many Chinese readers admitted that they would never be able to see such bloody truth about what Chinese government and banking system are doing all these years.
It seems under the cover of prosperity, there ar I can not pretend that i understand totally this book.
It seems under the cover of prosperity, there are always something secret going. Anyway, good book from the perspectives of 2 foreigners living in China for 20 years to see so clearly how things go. Aug 10, Marcus Goncalves rated it really liked it. Overall, very good book. Although written back in , it allowed me to make longitudinal comparisons between then and today. Nonetheless, considering when it was written and researched!
Nov 01, Sandeep rated it really liked it. A well researched though old book on Chinese economy. I wonder if the Chinese banks are still working under same set of rules today. Their economy has slowed down but still it marches on. Contains lot of minor errors. Abbreviations are excessively used everywhere. But if you get past the editorial shortcomings, it's a truly fascinating account of some of the most complex financial transactions carried out in the history of the world.
I found the book quite comprehensible even though it is pretty technical. If you have a basic understanding of financial markets i. Going into the book, I knew next to nothing about the structure of the Chinese economy. I came away with more than I bargained for. This book talks about the major events in recent Chinese economic history in excruciating detail.
I now understand that the Chinese economy is like no other in the world, because despite the seeming modernization of the economy over the last 20 years, most of these changes are merely skin-deep. Fundamentally, the Chinese economy is still firmly within the control of the CCP and the government. Politics is the emperor of all things. The biggest banks of China might be some of the biggest in the world, they may be listed on NYSE or Hang Seng, but they are extremely different from typical international banks like UBS, etc.
Most other publicly listed Chinese companies are the same way.
Some truly crazy things have happened in China, things you can't even imagine happening in any other modern economy such as the US or even India. The most shocking to me was an incident in the early s, when the CEOs and senior management of the biggest three publicly listed mobile companies were shuffled around. Truly incredible stuff. Politics always always comes first in China. What's even more interesting is that the facade of modernity that China puts on through its stock markets were carefully created in the late 90s by none other than Goldman Sachs.
Goldman pioneered the biggest IPO in China by putting together small state companies into a single national company and at the time of the IPO, the national company did not even actually exist as a single entity except on the books but investors bought it up as the aggregate numbers were staggering.
The situation with regard to IPOs these days is still quite similar. While Goldman also brought international accounting and management standards to China, it inevitably takes a while for any country as big as China to internalize these new rules. However, at the same time, great political battles have been fought over increased accountability of state-owned enterprises. As a result, Chinese companies today are still shrouded in secrecy.
To some extent, this is perfectly fine because most private shareholders are in it for short-term gain so they don't really care about transparency or even yearly profits so long as the share prices are going up. Internally, the authors portray the power struggles that lead to changes in economic policy as a battle between greedy, power-hungry party stalwarts and modern economists educated in the "Western" tradition of accountable management and transparency. The authors describe to the best of their knowledge the various dealings between the national banks, the Ministry of Finance and the PBOC.
I wasn't particularly interested in many of the details so I skimmed over some of the more involved and complex episodes. The authors quote a lot of numbers too, which would probably mean nothing to you if you aren't a macro-economist. There are large parts of this book that you can skip with no problems as it reads more like a economic whitepaper than a nonfiction book which I didn't mind at all. The crux of my new understanding about China can be summarized quite simply: the Chinese economy is not as stable and robust as emotion-hungry Western journalists will have you believe.
The issues that China faces from an economic standpoint are quite different from the US excluding the non-perfoming loans problem which is quite similar to the subprime crisis in the US but there are many issues and problems that China will have to deal with. Mismanagement of state companies, massive lending through national banks essentially, China's stimulus package after the global financial crisis and loss of investor trust in the system are among the greatest threats to the Chinese economy.
An unprecedented and amazing look at the inner workings of the once impenetrable Communist financial system. As might be expected, however, the authors did not get any exclusive access to the Politburo or leaders of the big banks. What they did get was perhaps more impressive. They assembled and analyzed all the publicly available information in state magazines, statistical reports, and accounting releases of publicly listed companies to prove that the whole Chinese system is rigged for the excl An unprecedented and amazing look at the inner workings of the once impenetrable Communist financial system.
They assembled and analyzed all the publicly available information in state magazines, statistical reports, and accounting releases of publicly listed companies to prove that the whole Chinese system is rigged for the exclusive benefit of a handful of insider Communist families. It's an amazing piece of detective work. What surprised me the most about their findings is how powerful, almost omnipotent, the state and the Communist party remain in the apparently free-wheeling world of contemporary Chinese capitalism.
The foreign manufacturing concerns that have spurred most of the Chinese economy's growth are indeed somewhat free from this, but that is only because they remain "outside the system" and are largely ignored or disdained by the still ideological cadre of the party. In their eyes, the growth brought by these companies is mainly a way to provide worker and company bank deposits to the Big 4 state-controlled banks that fuel "inside the system" growth. Besides forced loans to these profligate children of the party, the banks also put most of their money into rigged stock and bond "markets," which are only meant to approximate Western market systems, mainly in order to draw foreign investors into closely limited minority shares in these companies.
Their money, in turn, can be distributed as dividends to other Party targets. That remains a bad bet. Of course this is a different Communist system, one brought about by important reformers like Deng Xiaoping and the Shanghai group of leaders under Jiang Zemin. Yet the authors note that even the "reformers" they celebrate, most notably Zhu Rongji, the Premier throughout the s and early s, and Zhou Xiaochuan, now the head of the central Bank of China, hoped mainly to reform the old state-run system to make it more profitable, rather than dismantle it.
They wanted to make Communism work better. They were not, in the end, "capitalist-roaders. Though they've garnered billions in Western investments as examples of a modern, capitalist China, they remain tools of the Party. There's no way to explain the complexity or detail of this book's analysis in such a short review. It's filled with complicated, sequential organization charts and tables often too complicated to show how the financial system, the linchpin of the whole order, is rigged as more a less a giant Ponzi scheme.
The authors are optimistic the country can survive this scheme's unraveling, but the book does make one much less bullish about the "Chinese miracle. Sep 10, David rated it liked it.
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The books of many "national books" have been rewritten, removed, whitewashed.. Authors provide very detailed explanation of China national structuring of the banks and their systems. Few very important things left out and extremely critical that authors forgot to mention I may have left out : i it was the American underwriters who did the IPO for these banks.
So not to mention greed are universal, not just the Chinese very detailed book about the cronyism of China banking systems. So not to mention greed are universal, not just the Chinese.. So if naively speaking, perhaps it was right China banks may not need to "export" their introduction to America Authors were detailed but major mistakes and provided a sided opinions that China banking system is the worst in the world I rest my case Jun 19, Eric rated it liked it Shelves: business , non-fiction.
Red Capitalism is a complete, objective, and data-driven look at the forces behind China's meteoric rise over the past three decades. Indulging in neither cynical nay-saying nor worship at the altar of China Inc, authors Carl Walter and Fraser Howie first deconstruct the legitimate successes achieved by 'the Party', then weigh the hidden costs and long-term consequences.
A highly informative read littered with facts and figures, Red Capitalism suffers only by being so technical that at times it Red Capitalism is a complete, objective, and data-driven look at the forces behind China's meteoric rise over the past three decades. A highly informative read littered with facts and figures, Red Capitalism suffers only by being so technical that at times it gets bogged down by jargon and acronyms.
May 02, Luaba rated it really liked it Shelves: economy. A detailed look at the workings of the Chinese financial and economic policies structure. A great read for technocrats, rich in acronyms and graphics. It's also a really good guide for emerging market policy makers to adapt, avoid and improve on. Apr 27, Tracey Kreps rated it it was amazing. I cannot share enough praise for the presentation of this book.