7 - How risky is China’s red capitalism? Restructuring in the Chinese financial services sector

Abstract

With the rise of China as a new global economic player, several authors have attempted to qualify the evolving Chinese capitalist system. In spite of the different theoretical frameworks used and results obtained, these approaches tend to highlight, in the main, the pivotal role of the Chinese state. China’s red, or party-driven, capitalism is highly concerned with the risks inherent in current economic growth. The concept of ‘sustainable economic growth’ thus becomes paramount in today’s official political discourse and refers to change in the type of reform (see ‘Conceptualising the sustainability of the Chinese capitalist system’). Because of its core role in modern economic growth, the financial services sector is analysed in this chapter by means of (i) statistical analysis (‘Statistical analysis of the financial services sector in China’) and (ii) policy elements and political implications (‘Reforms and control of the banking sector and of financial services’). The concluding section (‘Concluding analysis’) presents an analysis of the risks inherent in this sector and in modern Chinese capitalism as a whole; it also highlights the weaknesses of the system. The chapter argues that issues of political control and vested interests in the Chinese system create serious challenges for further reform and internationalisation. While China’s financial sector as a whole seems to be reasonably stable, the issues of how to pursue the objective of further internationalisation puts the central leadership at odds with strong inner-party opposition.