Preface to the Second Edition xi Preface to the First Edition xvii List of Abbreviations xxi 1. Looking Back at the Policy of Reform and Opening 1 Thirty years of opening up: 1978?2008 2 Thirteen years of reform: 1992?2005 10 The end of reform: 2005 15 China is a family business 22 2. China?s Fortress Banking System 27 Banks are China?s fi nancial system 29 China?s banks are big banks 31 Crisis: The stimulus to bank reform, 1988 and 1998 33 China?s fortress banking system in 2010 41 The sudden thirst for capital and cash dividends, 2010 47 3. The Fragile Fortress 53 The People?s Bank of China restructuring model 56 The Ministry of Finance restructuring model 66 The ?perpetual put? option to the PBOC 73 The new Great Leap Forward Economy 76 China?s latest banking model 82 Valuing the asset management companies 85 Implications 88 4. China?s Captive Bond Market 95 Why does China have a bond market? 98 Risk management 102 The base of the pyramid: Protecting household depositors 116 5. The Struggle over China?s Bond Markets 125 The CDB, the MOF, and the Big 4 Banks 126 Local governments unleashed 134 Credit enhancements 141 China Investment Corporation: Linchpin of China?s financial system 145 Cycles in the fi nancial markets 158 6. Western Finance, SOE Reform, and China?s Stock Markets 163 China?s stock markets today 164 Why does China have stock markets? 168 What stock markets gave China 172 7. The National Team and China?s Government 185 Zhu Rongji?s gift: Organizational streamlining, 1998 186 How the National Team, its families, and friends benefit 196 A casino or a success, or both? 209 Implications 212 8. The Forbidden City 215 The Emperor of Finance 217 Behind the vermillion walls 220 An Empire apart 227 Have the walls been breached? 231 Cracks in the walls 235 Imperial ornaments 239 Appendix 245 Select Bibliography 249 Index 251
Carl E. Walter lived in China for twenty years and actively participated in numerous 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 was a member of the Management Committee at China International Capital Corporation, 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. More recently, he helped build one of the most successful and profitable domestic security and currency trading operations for a major global investment bank. Fluent in Mandarin, he holds a PhD from Stanford University and a graduate certificate from Beijing University. He currently lives in New York where he acts as an independent consultant. Fraser J. T. Howie studied Natural Sciences (Physics) at Cambridge University and Chinese at Beijing Language and Culture University. For nearly twenty years he has been trading, analyzing, and writingabout Asian stock markets. During that time he has worked in Hong Kong, trading equity derivatives at Bankers Trust and Morgan Stanley. After moving toChina in 1998, he worked in the sales andtrading department of China International Capital Corporation followed by a stint with China M&A Management Company. He has contributed to the SCMP, AWSJ, China Economic Quarterly,and China Economic Review as well as being a regularChina commentator on CNBC, BBC, Al Jazeera, and Bloomberg. Currently, he is a Managing Director at a leading Asia Pacific Brokerage firm in Singaporehelping international investors invest in both the Indian and Chinese markets.