Factions and Finance in China author Victor Shih has an Op-Ed (below) in the Wall Street Journaltoday. Shih’s research examines the push-and-pull between communist party elites and banking practices. In light of global economic slowdown, things are getting interesting.
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Around the world, the banks we see today are very different from their former selves of just a few months ago. The transformation has been most pronounced in the U.S. and Europe, where a combination of mergers and government involvement have reshaped the financial sector. But change is afoot elsewhere as well, and it isn’t always positive. In particular, Chinese banks are currently under enormous pressure to change their business practices in ways that represent a serious step backward.
A year ago, many of us were ready to be impressed with China’s banking system. To be sure, banks were still mainly state-owned, and the Chinese Communist Party continued to be omnipresent. However, the average bank managers were extremely risk conscious, and regulators from the China Banking Regulatory Commission (CBRC) swooped down on bank branches conducting surprise inspections every so often. Bankers were extremely hesitant to make uncollateralized loans to any firm except for the largest corporations.
This was an enormous change from just 10 years ago, when bankers doled out large sums at the slightest urging of the local governments and when banks were considered the “second treasury” by central policy makers. At that time, the nonperforming loan ratio was estimated to be nearly half of all loans outstanding. By January 2008, the official NPL ratio was less than 6%. This transformation wasn’t cheap or easy — it required hundreds of billions of dollars from the government to buy bad loans off bank balance sheets and recapitalize the institutions, and also the participation of Western “strategic partners” brought in to lend their expertise in best practices.
A group of experts, picked to deal within their specific area of expertise
A group of smart people, working on deals with which they are unfamiliar, bombarded with data, and forced to rely on others to succeed
According to Cambridge author A. Alexandra Michel, the second model consistently performs better, and the hard proof can be seen in the recent financial crisis. She’s followed two groups of new bankers in her new book, Bullish on Uncertainty, and has seen these forces at work. Here’s a cool clip of some of her ideas.
Capitalism with Chinese Characteristics is Huang’s analysis of entrepreneurship in China. It argues that China’s amazing economic growth was accompanied by a tightening of government control over what had previously been a thriving entrepreneurial culture in rural areas.
The Economist named Huang’s work among 2008’s best books. Why? Because it
[c]onvincingly overturns the usual analyses of the nature of China’s economy, and brilliantly predicts, a year ahead of other commentators, its steep decline.
A surprising new book argues that China is becoming less, not more, of a capitalist economy
MOST people, particularly those living outside China, assume that the country’s phenomenal growth and increasing global heft are based on a steady, if not always smooth, transition to capitalism. Thirty years of reforms have freed the economy and it can be only a matter of time until the politics follows.
The New York Times today has an article that speaks volumes about the publishing industry, especially to those who don’t realize how hectic it can be.
Houghton Mifflin Harcourt has stopped accepting manuscripts, in other words, working only with what they already have in the pipeline until they end the freeze. What will the literary agents do? I interned with an agent before landing at Cambridge, and I can understand the sensation this is causing amongst agencies; this only narrows their opportunities to place manuscripts with the most appropriate editors.
Meanwhile:
At the other end of the spectrum was Hachette Book Group, whose Little, Brown and Grand Central Publishing units together represent some of the biggest commercial authors, including David Baldacci, Nelson DeMille and James Patterson, not to mention the category-killing vampire queen, Stephenie Meyer.
As first reported by Publishers Lunch, an industry newsletter, Hachette is giving bonuses equal to one week’s salary to every employee in the company, in addition to the regular bonuses for which staff members are eligible. Just last month Reagan Arthur, a star editor at Little, Brown, signed a deal for a reported $6 million with the actress and writer Tina Fey to write a book of humorous essays.
Some are bracing for tough times, others are doing just fine because of their big hits. It’s the great battle of the long-selling backlist classics vs. the short-term smash hits. The article largely focuses on trade houses. While academic publishing has produced its star authors and big-sellers (always nice), I’m curious to see how it’ll work out on that end. Furthering scholarly discourse produces a lot of backlist, and online sales can keep the books around for a long time.
In our case not testing the waters of popular tastes, we’re looking for and highlighting intellectual trends. That is a nice place to be.
Have a great holiday, American readers! I won’t be around to update the site or moderate discussion until Monday.
Around the world, the banks we see today are very different from their former selves of just a few months ago. The transformation has been most pronounced in the U.S. and Europe, where a combination of mergers and government involvement have reshaped the financial sector. But change is afoot elsewhere as well, and it isn’t always positive. In particular, Chinese banks are currently under enormous pressure to change their business practices in ways that represent a serious step backward.
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