China's Guaranteed Bubble

Preface

Foreword by Robert Shiller

1. The Faultless Default

2. Failure is an Option (in China’s Shadow Banking Problem)

3. Homebuyers Who Cannot Lose

4. Petition Against the CSRC

5. Alternative Financial Innovations

6. Behind the Growth Engine: The Great Slowdown

7. An Abundance of Overcapacity

8. From Fortune 500 to Truly Internationally Competitive Companies

9. The Mother of All Credit: The Government that Never Defaults

10. Voodoo Statistics

11. Guaranteed to Fail? International Lessons on Implicit Guarantees

12. When the Tide Goes Out: How to Reform

Index

The truth about China’s financial industry—and the growing bubble that’s guaranteed to blow it apart…

In recent years, the Chinese economy has been fueled by the implicit guarantee of major banks and local governments by the nation’s central government. The resultant bubble has led to the emergence of a large shadow banking industry that poses major risks to China’s real estate market, speculative stock investments, state-owned enterprises, and more.

It’s not a matter of if China’s bubble will burst. It’s a matter of when.

This eye-opening book from renowned financial scholar Ning Zhu provides a provocative in-depth analysis of China’s current economic practices—and the profound dangers they pose—as well as a powerful wake-up call to investors, regulators, and the entire financial industry. Zhu’s book is packed with startling revelations, including:

* The enormous impact of China’s implicit guarantees on economic growth—and what will happen when those guarantees are gone

* The ever-increasing size of China’s shadow banking industry—and how it’s just the tip of the iceberg

* The once-reliable strength of China’s real estate and stock markets—and how they’re threatened by government distortion

* The latest financial innovations and channels—and how they are circumventing regulations and triggering unprecedented risks

Filled with fascinating case studies, worst case scenarios, and a well-argued case for much-needed reforms, Zhu’s enlightening book is a must-read for anyone with interests or investments in China’s rapidly changing economy. You’ll find intriguing new perspectives on traditional growth models, innovative solutions for overcapacity problems, and revealing new stats on so-called Voodoo Statistics. You’ll get a glimpse behind the curtain of the “unknown unknowns” of China’s implicit guarantees—and learn just how risky these government policies can be. Most importantly, Zhu’s book provides solid recommendations for diffusing the time bomb these guarantees can and will set off.

Brilliant, incisive, and ultimately optimistic, China’s Guaranteed Bubble will incite a much-needed call for change and set us on a new path of prosperity and growth—for China, the economy, and the world.