Paola Subacchi

The People’s Money is (at long last) a comprehensive overview of how the Chinese banking system operates. It tells how different the Chinese system is from any other, and presumably, allows importers, exporters and banks to avoid falling into numerous traps, from which there might be no return.

The Chinese “system” is an evolving network of kludges. The rules are different if you are mainlander, a foreigner, or in Hong Kong or Singapore or Toronto. There are separate offshore markets for international trade, and even bonds – though no secondary market for bonds at all. Similarly for equities, there’s China’s famous A share scheme and strict limitations on who can purchase what in Shanghai and Hong Kong. There are quotas for everything – arbitrary numbers. For example, Americans are only allowed to convert $20,000 a year. And with all the various limitations and requirements there is the inevitable paper burden. This is not your mother’s market economy. It is a collection of small experiments.

Subacchi wisely begins with an overview of how reserve currencies work, what privileges and burdens they afford, and how the renminbi (Chinese for “people’s money”) isn’t there yet, though it seems it might be building towards that.

What is missing from the entire book is the elephant in the room – the party. The Communist Party of China is very much about control. It is afraid to lose even the tiniest part of it. It manages and mangles all kinds of relationships out of this fear. Currency is just one. Foreign takeovers are kept small because the party doesn’t know what reverberations there might be at home, what trouble its companies (most are state owned) might get into overseas, and so that it can learn on the job how manage western style. Even Chinese bankers tell Subacchi there is no renminbi strategy. You just have to take it day by day.

As a result of this elephant that dares not speak its name, The People’s Money reads like a bank brochure. It’s all there, pleasantly laid out, comprehensive and revealing – but empty of motive and context.

David Wineberg… (mere)