China Fireworks: How to Make Dramatic Wealth from the Fastest Growing Economy in the World [Hardcover]

Hsu's intent is to provide investment advice for those interested in China. This he does well, explaining both his style of investing (momentum-driven), and the types of investments to look for and look out for. In the process, he also tells the story of a very dynamic economy.

First, some of the superlatives. China produces more steel, aluminum, cement, coal, clothing, and toys than any other nation. It has the most cell-phone users (average fees = $6/month). China already has the world's largest dam and airport, high-speed train network, and highest railroad. Now it is finishing a six-lane bridge connecting Shanghai with the island of Yang-shan (20 miles offshore) that will be the largest sea-span bridge and connect with the world's largest port. Shanghai alone has 40% of the world's construction cranes; the nation builds the equivalent of a new Philadelphia every six weeks, and a new nuclear power plant every year. China was also the world's largest manufacturing exporter in 2006, up from half the size of the U.S. in 2000. Renewable power sources are mandated to increase from 7% in 2008 to 15% in 2010.

Hsu sees Confucian values (social harmony via respect for authority, emphasis on education, strong interpersonal relationships, and personal integrity) as supportive of China's economic growth.

The author points out that China's major cities and provinces have different cultures, and sometimes different languages, and suggests those looking for real estate opportunities focus outside of Shanghai and Beijing - less competition, and larger overall population. Avoid investing in State-Owned Enterprises (SOE) - they generally are not well managed, and the government recently mandated they become self-sufficient or dissolve - about 2,000 of the remaining 100,000 went bankrupt in 2008. Hsu also points out that Chinese firm valuations are often severely distorted by the fact that the government may hold (without trading) a majority of shares in them. Hsu also suggests staying away from firms traded only on Chinese exchanges - their financial reporting requirements are not that stringent.

Chinese casinos can be very profitable (Macao's Sands Casino was built in 2004 and recouped that amount in less than one year), but differ from the U.S. - Chinese gamblers don't drink, consider fine shopping and dining a waste of time and money, and ignore slots. The focus is on table games.

Hsu sees education as a big business in China. It is estimated that a typical Chinese household with a child spends more on education than housing and health care. There are about 70,000 private school, serving 14 million students (200/). There is also a large market teaching English (especially to pass the TOEFL and GRE). English is now mandatory for high-school graduation. Recently the government mandated that rural schools accept pupils unable to pay tuition and books.

On average, less than 20% of the price a brand-name product commands in the U.S. goes to Chinese manufacturing. Per UBS AG, China earns only 0.35/Barbie doll retailing for $20 in the U.S. Because of these low margins, and the fact that other areas of China and Asia stand ready to take over, Hsu recommends staying away from investing in Chinese manufacturing. (China, however, is working to learn R&D in manufacturing and drug development - so watch out!)

Personal health care spending now averages $55/person/year, and Hsu sees this area as another good opportunity for investment.

Bottom Line: Very interesting and credible.

As the reviewer above, alludes, Mr Hsu operates an online subscription newsletter. One small niggle I have with the book is that it occasionally lapses into "advertorial" mode. Another grizzle is that the author takes a negative slant on the USA stockmarket. Examples given, of extended periods of low capital growth, do not include the dividend quotient. At those times dividend pay-outs were greater than today, and it is a tadge naughty to overlook them as a part of the total returns. But, aside from these points, this book is a mine of useful information for investors seeking an "emerging markets" exposure. Mr Hsu draws upon his personal life as a native of Taiwan, and presents, in an easily readable style, a brief history of China, and a progression to where the merger of capitalism and communism has brought China today. He gives excellent examples of stocks, mostly listed as ADRs on the NYSE, and their respective positive and/or negative attributes. At a cost of only $ 25, less than the brokerage fee on one share trade, this book represents stunning value. Bravo Mr Hsu.

I have read many other China investing books but I was particularly looking forward to this one mainly because I am a subscriber to Hsu's newsletters as well. I would say this is a good book for anyone interested in China and the opportunities it offers. As a subscriber I enjoyed the more detailed look at themes he merely touches on in his newsletters. Many of the topics he discusses in the book are not found in his other publications, so I was able to enjoy the new information.