The problem with Red Capitalism, it seems, is its insula nature that lends itself to corruption:
State debt appears to be quite low by international standards (just under 20% of GDP) but when all government obligations are lumped together, the authors reckon it is actually 76%.
The bigger problem, though, is that the system trades almost entirely with itself. Critical information about liabilities and pricing is deliberately concealed or impossible to discern; there are no outside entities establishing prices by bidding in the market. That undermines efficient capital allocation and allows excesses to fester.
Many officials are aware of this, but conflicts of interest get in the way of resolving the problem. As the book details, the whole business of providing, receiving and regulating money involves one state entity or another. It may be in China’s overall interest for the system to open itself up, but doing so would pit the government against itself. That will not happen without commitment from those on top.