Customer Reviews

Factions and Finance in China: Elite Conflict and Inflation

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As someone with some knowledge of China, I picked up this book because the title sounded interesting. Also, I wanted to know more about the financial system in China. It was kind of a whim, but I am so glad I got the book. Dr. Shih provides an insightful and poignant analysis unveiling the deep interdependencies between Chinese banking policy of the last two decades and the evolving political landscape of the Chinese Communist Party. First of all, I learned a LOT about the banking system in China, probably more than I ever needed to know. It's really stunning how much the Communist Party in China still controls the banks. Although parts of the book are too theoretical and pedantic (all the stats!), the book as a whole is nuanced, elegant, and backed by a rich set of primary data, including really detailed accounts of high-level intrigue. I was really impressed that Dr. Shih used classified Chinese government sources to construct behind-the-scene accounts. For example, top level technocrats used anti-corruption campaigns to stop inflation! That's not something you read in the Wall Street Journal. In sum, this book offers experts and laypersons alike a compelling framework for understanding financial policy decisions in China and their longer-term implications. Once you get past all the theory and stats (chapters 4 and 5), it's an engaging read that offers a lot of useful and interesting information about the financial sector and elite politics.

Shih's model is simple and brilliant. Though it complicates the normal factional model that I've seen elsewhere, Shih is convincing in his historical rooting of the actors. The only thing I wish he had explored with a bit more gusto would have been the role that institutionalization of power in China has weakened factional competition, and whether or not this could lead to reform of the financial sector. But even without this, I have to give Shih 5 stars.

great look into China's politics and banking, actually explains quite about about China's inability to switch from an export based, dollar propping up economy to a consumer society. This, combined with the more recent articles coming out of China really put to lie the idea that the Communist Party is some cool, calculating entity that is able to think 10 moves ahead of the decadent and shortsighted West.

Factions and Finance is a fascinating bridge from understanding politics in China to understanding monetary and fiscal policy. The two could not be more closely linked in China as they are in most countries: ultimately, Central Bankers get appointed by politicians, have dual or convoluted mandates and tend to have a strong sense of where their bread is buttered. To that end they are pretty responsive to politics and Central Bank independence really depends upon the political pressure being manageable. This was a controversial idea when I was in university but its abundantly clear now with negative real rates in the US, troubles in Europe and the like.

Vic Shih draws upon extensive work on factional allegiances and policies in China to explain the core dialectic of Chinese monetary and fiscal policy: local government leaders get promoted and occasionally paid for growth in their region and do not care about inflation or fiscal solvency that much. The central government and central bank does, and the fate of provincial mayors is not their concern. Factional allegiances are drawn up accordingly and the ebb and flow of these groups' priorities and patronage networks drive most of policy.

Mancur Olson's Rise and Decline of Nations explains how interest groups ultimately become important, stagnate and then impair policy. I think there are lessons for this in China today and to get a full grip on them there really isn't anything else out there as good as this book.

Watch out! This book is a scam. I was thinking I am getting a newly released book on finance in China. The cover look new and shinny with the right title, but the whole book is a low quality wordpress print out on a doctor's experience in prostate cancer. This is the first time I had such experience with amazon.com. I am very disappointed.