Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise.

By Carl E Walter and Fraser JTHowie. John Wiley & Sons; 248 pages; $29.95

With Wall Street and Europe in crisis and China strongly positioned as America's largest creditor, the question on the tip of everyone's tongue is: “Will China surpass US as the world’s premier global economy?" While China has ostensibly cornered the market in US currency, treasury and agency bonds and pushes full steam ahead in a seemingly unstoppable rise on the global stage, what undergirds its financial edifice is a fragile banking system that threatens to undermine its sustainability and success.

This forms the main vein of the timely new book, "Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise”. Throwing light on China's financial labyrinth, the book traces how the Chinese government reformed and modeled its financial system in the 30 years since it began engaging with the west.

Looking forward, Red Capitalism makes a penetrating analysis of how the government's response to the global financial crisis has created a banking system the stability of which can be maintained only behind the walls of a non-convertible currency, a myriad of off-balance sheet arrangements with non-public state entities and the strong support of its best borrowers -- the politically potent National Champions who are the greatest beneficiaries of the financial status quo. China's financial system, as such, is not a model for the west and indeed not a sustainable arrangement for China itself as it seeks increasingly to assert its influence internationally.

"Understanding how China has built its own version of capitalism is fundamental to understanding the role China will play in the global economy in the next few years," said the authors.

"While the overall economics of China's current predicament is well understood by international economists, the institutional arrangements underlying its politics and economics and their implications are far less understood. This book is about how institutions in China's financial sector its banks, local-government “financing platforms," securities companies and corporations — affect economic choices and development path, and what this means for the rest of the world eagerly watching China.” -- Star Business