China's Faustian Bargains: China's Economy Seen in the Undercurrent of Organized Unaccountability

As it reveals the underlying risks with certain business entities in China having to do with American investors, this book is now under attack by people who hold stakes in these said entities. There have been hired guns, posting false claims online to sabotage the book, using depictions about the book that are either counter-factual or distortive. The author has unpublished the book and made its content available to public interest communities. A financial fault line is now underlying China's economy. China has, in 2014, overtaken the United States in its size of total corporate debt. This book shows why such outsized corporate indebtedness in China, and other important institutional factors, much overlooked by most China studies, have grave implications for China's future economic prospect. By mid-2014, China's corporate-debt-to-GDP ratio had reached 135% (and growing), as compared to the same figure of the US, of 75%. This book elucidates on how such disproportionate corporate indebtedness, being one of the Faustian consequences necessitated by the many expediencies Beijing has carried out, greatly boosted China's GDP for longer than the last decade. This said ratio of 135% way exceeds the threshold of 80% - what an OECD study considers the maximum level for a country's economy to stay trouble-free. This, together with a number of other untoward features, ominous, entrenched structural problems China's systems currently face, may protract the nation's current economic downturn and further drag down GDP growth to unanticipated extents. The author benefits from his ability to access first-hand information in the Chinese language, and offers the world an array of inside information on the Chinese economic system. This is to be favorably compared to truncated views of that system offered by western commentators who lack access to materials published only in the Chinese language. Reportedly, many officially announced figures in China are known to be unreliable. The story of how Caterpillar fell victim, in 2013, to Enron-like accounting fraud in China, and incurred a loss of a startling US$ 580 million, is by no means an isolated event, but a thing that ordinary investors in the western world need to know about. Could Alibaba, and other Chinese companies listed on the New York Stock Exchange, possibly become the next Enron-like development? An American professor of financial accounting, who currently teaches in Beijing, points out how Alibaba's peculiar corporate structure may be a worrisome untoward design. This book enables readers to gain insights into the above noted, as well as many other, important events. This book illustrates how China's economy is now prone to destabilization from the aforesaid corporate indebtedness, and other factors, such as China's ongoing bad debt trap, and China's uniquely pro-cyclical fiscal structure. And, such ominously destabilizing setting is now made worse by China's already extremely high debt-to-GDP ratio, of over 260%. Few people in the west have come to know that China has an income tax base that is constituted by only less than 2% of the country's population. Such fiscal structure predicates the system's reliance on sales and corporate taxes, and this makes the economy more prone to destabilization. As, in macroeconomics, income tax being counter-cyclical (and hence is congenial to stabilizing the economy) and sales tax/corporate tax being pro-cyclical, effecting a destabilizing feedback loop. This book elucidates on how China's past high growth was, in part, procured by an array of expediencies, and how they bear Faustian consequences. The author shows how such Faustian consequences are now increasingly surfacing, making the scenario of significant lowering of GDP growth highly probable.

About the Author :
Aaron Ken Lee received his graduate and undergraduate education in a rare combination of the fields of study in economics, accounting, and business law, in the 1980s. For over 25 years he worked in the areas of international business and finance relating to Asia, mostly China specifically. He also taught economics, financial accounting and inferential statistical modeling at tertiary education institutions. He holds that lessons from the Enron and Subprime debacles can be fully understood only with the relevant knowledge in the three fields of economics, accounting, and business law. And, such insight into the Enron and Subprime lessons can now help us to shine through the haze and decode things that are characteristic of China, in most meaningful ways. In this book, the author integrated a perspective from what's known as the new institutional economics founded by Douglas North (1993 Nobel Prize economics laureate) with the aforesaid angles from accounting and business law, to give new insights into China's economic future. He first visited China in 1985, and has since the early 90s lived in Hong Kong and China, until recently, for over 20 years. He considers both English and Chinese his native languages.