Privatizing China: The Stock Markets and their Role in Corporate Reform [Paperback]

Carl E. Walter (Author), Fraser J. T. Howie (Author)

Book Description

ISBN-10: 0470821205 | ISBN-13: 978-0470821206 | Publication Date: June 25, 2003

Much is written about the various efforts aimed at reforming China’s state-owned enterprises. But in all this literature the Chinese government’s determined effort to use the equity capital markets as a tool of enterprise reform has been virtually ignored. The fact is that during the past decade this has been, and will continue to be, the principal thrust with regard to the reform of state-owned enterprises. On-again, off-again, noises about bankruptcy, M&A solutions and asset management companies are only sideshows in the process.

Carl E. Walter is a Managing Director of JP Morgan and Chief Operating Officer of its China businesses. Prior to joining JP Morgan in 2001, Mr. Walter was a Managing Director and member of the Management Committee of China International Capital Corporation. He was Chief Representative in Beijing for Credit Suisse First Boston from 1993-8. During his decade in China, Mr. Walter has participated in a number of pathbreaking international and domestic share listings and debt issues for Chinese companies, banks and the Ministry of Finance. He holds a PhD from Stanford University and a graduate certificate from Beijing University.

Fraser Howie is an independent financial analyst located in Beijing. Over the past ten years he has worked in Hong Kong trading equity derivatives at Bankers Trust and Morgan Stanley. After moving to China in 1998 he worked in the Sales and Trading Department of China International Capital Corporation then with a domestic retail financial services company and most recently with China M&A Management Company.

Editorial Reviews

From the Inside Flap

Few aspects of Chinas economic reform and emergence into the world economy have attracted as much interest, but have been so poorly understood, as the development of the country's stock markets. In Privatizing China, the authors Carl Walter and Fraser Howie have written a complete account of the unlikely evolution of equity markets in an economy without a history or tradition of private property. As long-term market participants, the authors provide an up-to-date examination of the evolution of China's exchanges, the corporatization process and issuance procedures informed with personal experience.

Against this larger environment, this fascinating book shows how the different market players and the listed companies have performed over time. It addresses some of the critical problems facing the market today, such as the huge imbalance between tradable and non-tradable shares. It also examines how the market has become dominated by institutions and individual "big shots," who have manipulated and cornered the market to suit their own needs, while forcing the retail investor to the sidelines.

In addition to being an invaluable history and overview book, Privatizing China argues that the spontaneous development of stocks and stock markets beginning in the early 1980s forced the government to reform in directions conducive to greater market development. Perhaps most surprising consequence is that a system designed to ensure absolute state control of listed companies has proven to be quite conducive to what may be called privatization with Chinese characteristics.

From the Back Cover

"Privatizing China demystifies one of the least understood institutions in China's reforming economy. The authors' thorough research and cogent analyses make this book essential reading for foreign investors poised to enter the securities markets of post-WTO China – or indeed, for any student of China seeking to make sense of the country's recent economic history."
Catherine Gelb, Editor, The China Business Review, The US-China Business Council

"Carl Walter and Fraser Howie bring together a wealth of experience to this complex and deeply important topic. Their book contains a mine of invaluable quantitative and qualitative information as well as an incredible depth of knowledge. It is written in an absorbing fashion, with an abundance of penetrating judgments. It is essential reading for anyone investing in companies from mainland China."
Professor Peter Nolan, Judge Institute of Management Studies, University of Cambridge

"This book will answer many peoples questions regarding SOEs and the stock market. I think it is destined to become the standard reference work on the subject."
Jean C. Oi, Director, Center for East Asian Studies, Stanford University

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Product Details

• Paperback: 296 pages
• Publisher: Wiley (June 25, 2003)
• Language: English
• ISBN-10: 0470821205
• ISBN-13: 978-0470821206
• Product Dimensions: 9 x 5.9 x 1.2 inches
• Shipping Weight: 1.1 pounds
• Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #1,035,541 in Books (See Top 100 in Books)

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4.0 out of 5 stars Meticulous Historical Record, Some Analysis, May 10, 2008

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Anonymous (Berkeley, CA USA) - See all my reviews

This review is from: Privatizing China: The Stock Markets and their Role in Corporate Reform (Paperback)

Carl Walter and Fraser Howie's 2003 book Privatizing China: The Stock Markets and their Role in Corporate Reform is both a meticulous account of the previous 20 years of development in China's equity markets and a reasoned reflection on the philosophical nature of securitization in a post-socialist transition economy. The book relies upon extensive primary research - including interviews with high-level Party officials, a review of the multitude of relevant laws and regulations enacted during the previous two decades, and an assessment of market metrics from various official and unofficial sources - and adds proprietary analysis of the political, social, and economic considerations behind such developments. The book concludes with speculation on the future direction of equity markets in China. In short, while difficulties related to the presence of non-tradable shares, insufficient regulation, and low contestability remain central features of the Chinese experience, the authors predict continued expansion "with Chinese characteristics."

Walter and Howie present a relatively simple yet compelling explanation of the forces driving market development. The first, demand from township and village enterprises for capital, developed in the late 1970s and early 1980s as fiscal reform limited the amount of revenue available from the central government. The Party, meanwhile, allowed limited development of securities markets because it was both economically beneficial and channeled in such a way as to avoid full privatization. Potentially destabilizing corporate reform, at least at the time of the book's publication in 2003, had largely been avoided through the creation of two parallel markets, one with tradable and the other with non-tradable shares. Walter and Howie's book concludes by noting the difficulties and contradictions of these dual markets, and suggests that further reform is necessary should the government hope to see continued expansion. These pressures ultimately resulted in G share reform in 2005, a subjected treated at length in the authors' 2006 update to this edition.