Carl E. Walter

the fragile financial foundation of China's extraordinary rise

Red capitalism

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.

The Chinese Communist Party and the Financial Deterioration of China

The Red Dream

Fraser J. T. Howie

Much is written about the various efforts aimed at reforming China’s state-owned enterprises. But in all this literature the Chinese government’s determined effort to use the equity capital markets as a tool of enterprise reform has been virtually ignored. The fact is that during the past decade this has been, and will continue to be, the principal thrust with regard to the reform of state-owned enterprises. On-again, off-again, noises about bankruptcy, M&A solutions and asset management companies are only sideshows in the process. Carl E. Walter is a Managing Director of JP Morgan and Chief Operating Officer of its China businesses. Prior to joining JP Morgan in 2001, Mr. Walter was a Managing Director and member of the Management Committee of China International Capital Corporation. He was Chief Representative in Beijing for Credit Suisse First Boston from 1993-8. During his decade in China, Mr. Walter has participated in a number of pathbreaking international and domestic share listings and debt issues for Chinese companies, banks and the Ministry of Finance. He holds a PhD from Stanford University and a graduate certificate from Beijing University. Fraser Howie is an independent financial analyst located in Beijing. Over the past ten years 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 then with a domestic retail financial services company and most recently with China M&A Management Company.

The Stock Markets and Their Role in Corporate Reform

Privatizing China

E.R. Merz

This NATO Advanced Research Workshop on Disposal of Weapons Plutonium is a follow-up event to two preceding workshops, each dealing with a special subject within the overall disarmament issue: "Disposition of Weapon Plutonium", sponsored by the NATO Science Committee. The first workshop of this series was held at the Royal Institute of International Affairs in London on 24-25 January 1994, entitled "Managing the Plutonium Surplus, Applications, and Options". Its over all goal was to clarify the current situation with respect to pluto nium characteristics and availability, the technical options for use or disposal, and their main technical, environmental, and economic constraints. In the immediate term, plutonium recovered from dismantled nuclear warheads will have to be stored securely, and under international safeguards if possible. In the intermediate term, the principal alter natives for disposition of this plutonium are: irradiation in mixed oxide (MOX) fuel assemblies in existing commercial light-water reac tors or in specially adapted light-water reactors capable of operation with full cores of MOX fuel .and irradiation in future fast reactors. Another option is to blend plutonium with high-level waste as it is vitrified for final disposal in a geologic repository. In both cases, the high radioactivity of the resulting products provides "self shielding" and prevents separation of plutonium without already developed and available sophisticated technology. The so-called "spent fuel standard" as an effective protection barrier is - quired in either case.

Approaches and Prospects

Disposal of Weapon Plutonium

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.

Carl E. Walter

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