The widely held view of the Asian Financial Crisis is that it had no substantial impact on China. In fact, the country was far more vulnerable than most people realized, due to the high possibility of financial contagion entering the system from Hong Kong through Guangdong province. This book analyzes the severe policy challenge that it presented for China’s leaders.
The crisis in Guangdong’s financial institutions provided a forewarning of the difficulties that lay ahead as China’s integration with the global financial system deepened. The experience of Guangdong in the Asian Financial Crisis provided a profound lesson for China’s policy-makers as they planned the country’s strategy for financial reform in the following years. China was able to avoid disaster by astute and difficult policy choices, in the face of fierce pressure from outside the country, as well as from different domestic interests at many different levels. The successful resolution of the crisis provided a breathing space for the leadership. It gave it time to undertake necessary reforms in the country's financial system in the decade that followed the crisis.
Table of Contents
List of Tables Preface Introduction Part 1. The challenge: the threat of forest fire 1. Introduction 2. Guangdong in the 1990s Central-local relations Reform and opening up International trade Capital flows Real estate Employment and standard of living Public order Smuggling Criminal behaviour among government and Party officials 3. Linkages between Hong Kong and Guangdong Relationship between internal and external capital flows Red chips International trust and investment companies (ITICs) Other ‘window companies’ Employment and industrial structure 4. Hong Kong in the Asian Financial Crisis 5. Guangdong in the Asian Financial Crisis 6. The threat of contagion for China’s financial system 7. Conclusion Part 2. The response: three steps (san bu zou) to control the fire 1. Introduction 2. The first step: bankruptcy of Guangdong International Trust and Investment Corporation (GITIC) What was GITIC? Mounting pressure of insolvency during the Asian Financial Crisis From closure to bankruptcy Bankruptcy What kind of firm was GITIC? Business behavior Government monitoring Criminality 3. The second step: restructuring Guangdong Enterprises (GDE) Establishment and growth of GDE Structure of GDE Guangdong Investments Ltd (GDI) Guangnan GDE on the eve of the Asian Financial Crisis The arrival of the crisis for GDE The decision to restructure GDE The restructuring process What kind of firm was GDE? Business structure Business behavior Government monitoring Did GDE’s restructuring change it into a real firm? Criminality China’s Phoenix 4. The third step: cleaning up the local financial institutions Introduction The spreading fire Establishing the battle plan The ‘lightning attack’ Trust and investment companies Urban credit cooperatives UCCs: the case of Shantou Rural financial institutions National state-owned banks, local financial institutions and Hong Kong 5. Conclusion: the achievement of ‘cutting the trees to save the forest’ Postscript. Finance and the real economy: China and the West since the Asian Financial Crisis Introduction The West China Interaction between China and the West Fragile international financial system Bibliography
Peter Nolan is Founding Director, Centre of Development Studies, University of Cambridge and Director, China Centre, Jesus College, Cambridge.