Red Capitalism Book Review - Essay Example

It also gives readers an idea of how government runs China’s financial system and state-owned enterprises. It is interesting to note that unlike other developed countries, China tends to have a political system that is not stable. Renminbi is also not a convertible and internationally recognized currency. Chinese is also known for its high-context culture. It is hard to control and manage businesses without intervention by the party or government. It is claimed, “The Party is able to ensure its control over China’s most powerful business groups by having the power to appoint their top management” (Walter and Howie 193).

The authors also point out how China wants to reform its financial systems in order to connect with other international firms and banks to attract investors to come by implementing international reporting standard. China’s economy in past 30 years definitely has grown from the primitive one to a more modernized and internalized one with effort of American investment bankers and implementation of international accounting, financial, legal system. Indeed, China is now proudly represented by 44 companies on the Fortune Global 500 list (Walter and Howie 11).

The financial system is dominated by four big banks, which include Bank of China, China Construction Bank, Agricultural Bank of China, and Industrial, and Commercial Bank of China. These four banks also control 45% of China’s total financial assets. The Party wants these banks to support the SOEs in all circumstances (Walter and Howie 47). Banks are the main tools for the party to facilitate country’s economy growth. Bank lending and indirect financing seems to be the only way to achieve GDP growth and attract foreign investors.

Surprisingly, the Big 4 banks increase their lending at nearly 20% per annum (Walter and Howie 51). The Party tells the bank to loan to the SOEs, but it seems that it is unable to tell the SOEs to repay the loans (Walter and Howie 47). Therefore, the balance