Red Dream - The Chinese Communist Party and the Financial Deterioration of China

An eye-opening deep dive into the sources and consequences of how China has financed it's rise to global economic prominence
 
In The Red Dream: The Chinese Communist Party and the Financial Deterioration of China, veteran finance executive Carl Walter uses his unique experience in Chinese finance to deepen his exploration of how the Chinese Communist Party finances its obsession with GDP growth and social control. Overwhelmingly debt-fueled, the party's financial strategy has driven an unsustainable growth in banking and state enterprise assets. Inevitably the party's own financial health is being severely weakened and China's future over the next decades put in doubt. You'll also find:
* A discussion of the financial power of local governments and the Ponzi scheme created by their sale of land use rights
* How China's entry into the World Trade Organization gave rise to today's China
* How the party and China's regulators enable banks to present outstanding performance metrics
* An exploration of the party's financial assets and liabilities since 1979
* Examples of financial crisis management and related costs incurred by China and the US
* A look at Japan's experience as a potential guide for China future development
 
An essential read for anyone interested in international economics, geopolitics, and finance, The Read Dream will also earn a place in the hands of finance professionals, bankers, policymakers, corporate strategists, and investors.

List of contents

Preface xi
 
List of Abbreviations xix
 
Chapter 1: From Turning Point to Turning Point 1
 
An Abrupt About-Face 2
 
The Golden Age: A Short Story 4
 
Underlying Conditions 7
 
The Yin and the Yang of the China Dream 10
 
Convergence 20
 
Chapter 2: The Shadow Fiscal System 23
 
China's "Centralized" State and Localized Financing 24
 
Aspirational Central Finances, Fiscal Collapse and the 1994 Budget Law 29
 
The Continual Local Scramble for Funds 35
 
Then There Was the Land but It Is Not Free, 1999-2007 38
 
Paving the Country Over 45
 
The Vulnerability of Local Governments, Banks, and Enterprises 46
 
Implications 48
 
Chapter 3: China's Banks and the Deposit Bonanza 57
 
China's State Banks and the "Tree" Model of Banking 58
 
Command Lending and Funding 66
 
Fintech and Other Challenges to Bank Deposits 72
 
Bank Capitalization 80
 
Implications 83
 
Chapter 4: Trees Can Grow to Heaven! 87
 
Evolution of Chinese Balance Sheet Management Techniques 88
 
Outcomes in Financial Engineering Chinese-Style 91
 
Channels to Support State Bank Performance Metrics 93
 
Implications 115
 
Chapter 5: Beautifying Bank Balance Sheets 119
 
Parking Assets-- the Interbank Market and "Repos" 120
 
Flexible Loan Agreements 124
 
Local Government Bonds 127
 
Government "Guidance" Funds 137
 
Off-Balance-Sheet Items 138
 
Comments 146
 
Chapter 6: After 30 Years, Was Deng Xiaoping Right? 151
 
A Summary State Balance Sheet 152
 
Inefficient Investment Equals Extrabudgetary Funding 154
 
The Promise of the Stock Markets 156
 
Massive Growth in Deposits 164
 
"Opening" the Door to Foreign Investment 166
 
Excessive Reliance on Debt 168
 
Deterioration of State Finances 169
 
Summing Up 173
 
So Was Deng Right, Can Capital Markets Be Used in a Socialist Economy? 178
 
Chapter 7: China versus the United States: Comparing the Costs of Financial Crises 183
 
Summary Financial Crises, China and the United States 184
 
Comparisons of Crises 189
 
Macro Comparisons and the Role of Central Banks 203
 
Comparisons of State Net Worth 206
 
Comments 208
 
Chapter 8: Japanese Bubbles 211
 
Bubbles and Japan's Banking Crisis of the 1990s 212
 
Why Did Resolving Japan's Banking Crisis Take So Long? 215
 
More Points of Comparison, China versus Japan 218
 
Comparative Cashflow Chains 222
 
How Might the Party Change Its Spots? 223
 
The Value of Chinese State Industrial Enterprise Assets 226
 
Comments 232
 
Chapter 9: Chinese Balloons 235
 
The Party's Ruling Paradigm 238
 
Chinese Balloons 239
 
Convergence Revisited 241
 
Appendices 245
 
Selected Bibliography 251
 
Index 257

About the author

Carl E. Walter worked in China for over three decades. He has done IPOs of state enterprises, worked in joint venture investment banks, helped build out onshore banking platforms and was a member of the board of a large Chinese bank. Fluent in Mandarin, he holds a graduate studies certificate from Peking University and a PhD from Stanford University. Carl is the co-author of Red Capitalism and Privatizing China.

Summary

An eye-opening deep dive into the sources and consequences of how China has financed it's rise to global economic prominence

In The Red Dream: The Chinese Communist Party and the Financial Deterioration of China, veteran finance executive Carl Walter uses his unique experience in Chinese finance to deepen his exploration of how the Chinese Communist Party finances its obsession with GDP growth and social control. Overwhelmingly debt-fueled, the party's financial strategy has driven an unsustainable growth in banking and state enterprise assets. Inevitably the party's own financial health is being severely weakened and China's future over the next decades put in doubt. You'll also find:
* A discussion of the financial power of local governments and the Ponzi scheme created by their sale of land use rights
* How China's entry into the World Trade Organization gave rise to today's China
* How the party and China's regulators enable banks to present outstanding performance metrics
* An exploration of the party's financial assets and liabilities since 1979
* Examples of financial crisis management and related costs incurred by China and the US
* A look at Japan's experience as a potential guide for China future development

An essential read for anyone interested in international economics, geopolitics, and finance, The Read Dream will also earn a place in the hands of finance professionals, bankers, policymakers, corporate strategists, and investors.

Product details

• Authors: Carl E Walter, Carl E. Walter, Ce Walter, Walter Carl E.
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Hardback
• Released: 31.10.2022
• EAN: 9781119896159
• ISBN: 978-1-119-89615-9
• No. of pages: 288
• Subjects: Social sciences, law, business > Business > Economics; Makroökonomie, Volkswirtschaftslehre, Economics, macroeconomics, Finanzökonomie, Financial Economics, Internationale Ökonomie u. internationaler Handel, International Economics & Trade