In Red Capitalism, Carl Walter and Fraser Howie detail how the Chinese government reformed and modeled its financial system in the 30 years since it began its policy of engagement with the west. Instead of a stable series of policies producing steady growth, China's financial sector has boomed and gone bust with regularity in each decade. The latest decade is little different. Chinese banks have become objects of political struggle while they totter under balance sheets bloated by the excessive state-directed lending and bond issuance of 2009. Looking forward, 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 is not a model for the west and, indeed, is not a sustainable arrangement for China itself as it seeks increasingly to assert its influence internationally. This is not a story of impending collapse, but of frustrated reforms that suggests that any full opening and meaningful reform of the financial sector is not, indeed cannot be, on the government's agenda anytime soon.

Table of Contents:
Chapter 1: "One short nap took me all the way back to before 1949". 1978-2008: 30 years of Opening. 1992-2005: 13 years of Reform. 2005: the end of Reform. China is a family business. Chapter 2: China's fortress banking system. Banks are China's financial system. Crisis and bank reform, 1994 and 1998. China's fortress banking system in 2009. The sudden thirst for capital and cash dividends, 2010. Chapter 3: The fragile fortress. The foundation of China's banking machine. Bad bank performance and its implications, 2009. The "perpetual put" option to PBOC. China's new post-Lehman Brothers banking model. Implications. 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. China Development Bank, the Ministry of Finance and the Big 4 Banks. People's Bank of China, NDRC and CSRC: corporate bonds. Local governments unleashed. China Investment Corporation: the lynchpin of China's financial system. Cycles in China's financial markets. Chapter 6: Western finance, SOE reform and China's stock markets. Why does China have stock markets? What the stock markets gave China. Chapter 7: The National Team is China's government. The National Team, the Organization Department, Huijin and SASAC. Chinese stock markets: Who benefits? A casino or a success or both? Implications. Chapter 8: The Forbidden City. The Emperor of Finance. Behind the vermillion walls. Red capitalism means leverage. The Emperor's new financial playthings. Appendices.