China Fireworks: How to Make Dramatic Wealth from the Fastest-Growing Economy in the World

By Robert Hsu
(Wiley, May 2008)

In China Fireworks: How to Make Dramatic Wealth From the Fastest-Growing Economy in the World, Taiwan-born and Southern California-raised Robert Hsu gives you the rundown on investing in, and hopefully profiting from, what he calls the China Miracle.

With the burgeoning population, the rapid-fire development of and modernization of cities and the country's need for virtually everything in massive quantities, the chance to strike gold may sound like a sure thing, right? No so fast. China's sheer size and complexity make it difficult for outsiders to comprehend.

Enter Hsu. Well-suited to make sense of it all for you, he presents the material clearly in this book.

Hsu is a former investment banker at Goldman Sachs, who became a millionaire at 29, and retired at age 30. He is back to work, of course, and is now the president of the private-client money management firm called Absolute Return Capital Advisors, the publisher of two newsletters, "China Strategy" and "Asia Edge" and the overseer of a network of in-China analysts who keep him updated on any corporate, cultural and government changes.

Throughout his book, Hsu spells out what investments are available to you and your clients as foreign investors, explains the different stock exchanges and the types of stocks and recommends what to avoid, usually State-Operated Enterprises (SOEs), which tend to be unprofitable and run often by incompetent managers. In addition, he gives you a compact tour of Chinese history—from the Silk Road days (some 2,000 years ago) to the present—as well as a regional breakdown of the country's people by physical traits, customs, character and business acumen.

Hsu is a very different investor from someone like Warren Buffet, whose strategy is "to get married" to a company in which he invests. Hsu goes for momentum stocks on the upswing and favors the quickie divorce when investments head south. Hsu's plan of action also includes buying stocks of companies that are industry leaders, or fast approaching that status, and that also promise double-digit growth and high-profit margins. Like other books on foreign investing, Hsu recommends taking positions in companies that sell China such raw materials and commodities as steel, iron ore, oil and copper.

The author glosses over any of his own financial setbacks with vague wording, rather than specifics. That's too bad, because the most effective of these books, or any advice from seasoned pros, tell it straight-warts and all—which makes their counsel all the more instructive and memorable.

One false note is Hsu's discussion about China's investments—public works, oil fields, food, schools and stadiums—in poor African nations, such as Sudan, Angola and Ethiopia. For a country like China, whose proud and stunning mercantile history goes back more than 3,000 years, it sounds naïve at best, if not downright dishonest, to suggest that Beijing (or any government, for that matter), with its voracious appetite for raw materials and commodities, expects nothing but goodwill from investments in an undeveloped country like Sudan, which in turn, can deliver oil to an ever-blossoming China.