Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise

Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise

China's banking system is opaque. Financial excesses made from the state owned companies are often pumped back into the banking system. To the degree the money has over run the capacity of the formal banking system to absorb the surplus capital, an informal banking sector has emerged, to create a shadow banking system that is even more duplicitous and unseen. Some analysts in the West believe that the bad debts in China can easily range within USD 5 trillion to USD 8 trillion, more than 1/3 of the entire gross domestic product of China.

Carl E. Walter and Fraser T. Howie are not saying, for a fact, that China will collapse; a claim made by Gordon Chang in the mid 1990s. But they point to the numerous warning signals that afflict China, including's China's rapid deterioration of its ability to manage the environment-----this from a country that has become the cardinal embodiment of the concept of harmony. Surely, something is amiss in China. 

On top of that, there are practically hundreds of millions of Chinese, who are often dissatisfied with their lives in China. They want to move abroad, ideally, the West. With more than 500 billionaires in China according to Forbes, those perched on top of the food chain can of course flee China at the first sign of trouble. Many will not have this luxury. Invariably, this makes China a serious "unknown unknown"-----even if it has ascended to the throne of one of the great powers in the world.