The China Dream: The Quest for the Last Great Untapped Market on Earth

The main thesis of the book is that many big Western companies substitute a blurry, optimistic picture of a vast potential market for a balanced view based on hard data. When it comes to China, wishful thinking replaces critical distance and realistic assessment.

One thing that "The China Dream" explains very clearly is the extent to which two economies in China exist parallel to each other. One is the old socialist economy that is protected from change and the market forces. The other is a vibrant, export -oriented economy of manufacturing plants that assemble goods under the management of mostly Taiwanese and Hong Kong companies. The latter is the poster child for China, but the former continues to gobble up the people's savings to churn out the products that the planners want to see. Stripped of the success story of the export-oriented manufacturing companies, China's economy looks like a disaster waiting to happen.

Studwell is not a China-basher. He admires the stamina and determination of the small entrepreneurs in China who manage to hold their ground against a rapacious bureaucracy, the lack of credit from state-owned banks and the dumping strategies of pampered state-owned enterprises.

Earlier reviewers have criticized "The China Dream" as biased and uninformed (no CEO interviews). Having worked in China for three years, my impression is that Joe Studwell has a very solid grasp of the economic and political realities in the People's Republic of China, and that there is no point in listening to the rosy projections of CEOs and foreign luminaries who were "toured about in government limousines and fed an endless diet of spurious statistics"(255).

In a nutshell: This book is absolutely recommended reading for anyone who wishes to work in China or just wants to know what to make of all the praise lavished on a socialist developing country.


Dense/ Well thought out and clearly understood.   May 9, 2002
Lemas Mitchell (Chengdu, Sichuan (China))
24 out of 25 found this review helpful

This lengthy document of some of the snafus of people that were managing HUNDREDS of millions of dollars of investors' money is a testament to exactly how rare knowledge really is. And how much of a role psychology plays in the market. And how true the adage "Those who do not learn history are doomed to repeat it" is.

Currently, I am living here and find that the behavior of the people here is accurately represented by this work and could have been predicted based on some of the historical evidence that is given by Studwell. It is obvious that he has a good, sharp mind and has paid attention to his subject material.

I've often heard phrases such as: "We Chinese have invented words for every thing because of our long history and we don't need to invent more." Or, "The American government lies to you too, and is just as afraid of a revolution as ours is." And on and on and on. The mentality of the people here is very stubbornly fixated in the 12th century and is not likely to change anytime soon. It is with this understanding that the author goes on to describe the Chinese customs that make this reality possible--even now, people here think that Beijing and Shanghai are the financial capitals of the world because of what the government tells them.

The one weakness of the book is that he doesn't devote a whole chapter to describing the cultural aspects alone. And this was perhaps a conscious decision because the perception of a culture is not reproducible from person to person-- although I will admit that all that he has said has been consistent with my observation. It would be easy to predict what he observes if you could just understand the cultural context in which these things take place.

It might also have been nice if he had drawm some parallels with the nervousness that the Soviet Union created in the USA. (It may be that I am going overboard with my "could've/should've"s, as just the documentation of this must have taken FOREVER. It is mind boggling that one person could find so much and keep SO abreast of what was happening.)

It is prudent to underline several things of which he has a mature understanding:

1. The essence of Chinese culture is FORM OVER SUBSTANCE. So he correctly notes that the government has spent a lot of time on making people believe that they were going to get returns that they weren't. This explains why people will repeat things a large number of times to convince themselves (and others) that it is true.

2. The obsession of this place with control. The government here has to be in charge of EVERYTHING. And, as to the first observation, they will not reveal the full extent of their control.

3. The mechanism by which a lot of the "guan-xi" money is distributed. (The hiring of consultants that are children of government officials who have sway-- or at least seem to.)

4. That nasty little sense of superiority that makes the Chinese destructively delimit everything into a Chinese/ Non-Chinese (and therefore inferior) way of doing things. Effectively, this makes the number of transactions that would take place in a properly functioning market much lower.

5. The extremely poor understanding of basic economics and its confusion with the other "social theater games" that they like to play here. Everyone seems to think that if we just believe it hard enough, then it is true. And most importantly how these wildly inaccurate ideas have been implemented as public policy by a government that is NOT subject to feedback mechanisms.

On the negative side: The documentation of the book was thorough, but it was just TOO MUCH and made the book rather heavy. Also lacking was a more detailed comparison of the parallels of this with Japan. They did some of the same things and went down the same roads that China is going down now--although with much more reliable enforcement of contracts/ transparency. And during the 1980s, the Americans bought right into the things published by Japanese think-tanks set up in the USA and created the same sense of hysteria. But when everything was revealed in time (as it usually is), then people understood the folly of their ways.

But for all his clear writing, most people will probably never even hear of the book. They are going to have to waste investor's funds and learn the hard way.


A Superb Antidote to the China Hype   August 23, 2002
Jeffery Steele (Taipei, Taiwan)
32 out of 36 found this review helpful

There's an incredible amount of hype about China's economic market. Its huge population, high-skilled low-wage work force, and relative political stability for a developing country all act as a powerful lure to multinationals eager to set up shop and begin selling to one-quarter of the world's population. Under tough negotiations from Chinese officials, these companies tend to give away the kitchen sink to ensure they get access to the huge market. But what do they get in return?

Joe Studwell does a service to the informed public by clearly demonstrating that almost all the businesses who have gone to China have gotten next to nothing for their technology transfers, special fees, and tremendous time and effort they've dedicated to the market. Almost uniformly, they have high-balled their expected sales and profits from the Middle Kingdom and found immense barriers such as unseen regulations and fees, corrupt officials, unenforced laws, local spin-offs to their products, etc., that should have sent them packing. Yet almost all of them push on, undeterred.

As Studwell explains, the reason for this is an old phenomenon among Western businessmen he calls "The China Dream." Despite continual setbacks, these hard-headed businessmen are too attracted to the possibility that they have something to sell that even a small percentage of Chinese may want to buy. Those huge potential numbers are too much of an enticement to businesses to easily let go of their foothold in China.

But Studwell's book is more than just about the experience of foreign businessmen in China. It also shows that the China market is becoming a trap for the Chinese people themselves. They work hard and save, and the government confiscates and then destroys their money by trapping it in state-owned banks that are insolvent because they lend to state-owned enterprises that are unproductive.

"The China Dream" is well-written and informative. Its thesis is provocative, but well supported. Studwell argues there is no rational basis for much of China's economic success and that most of its market is as closed and overregulated as the Soviet Union's. This book should be required reading for every CEO of a multinational who dreams of selling in China.


De-mythologising China   April 11, 2002
Anthony O Brien (Dublin4 Ireland)
23 out of 27 found this review helpful

Since the time of Marco Polo, China has held out the promise of unimaginable wealth to anyone who could tap is vast domestic market. Writing in the 1840's an English businessman reckoned that if the Chinese could be persuaded to lengthen their shirt-tails " by only one foot," the Lancashire cotton mills would work round the clock. Some years later, US tobacco pioneer James Buchana Duke is said to have seen the Chinese population, 430 million, on an atlas, and said,"That is where we are going to sell cigarettes." In 1984, IBM Chairman Ralph A Pfeiffer Jr. mused, "If we could only sell one IBM PC for every 100 Chinese, or every 1,000, or even every 10,000..."

And therein as Joe Studwell's excellent book, "The China Dream," clearly demonstrates, lies the allure of China. With a quarter of the world's population, China must surely emerge as the largest untapped market for every imaginable product? Well, no.

In the 1990's, with Deng Xiaoping's exhortation, "to get rich is glorious" ringing in their ears, western politicians and executives flocked to China to exploit the newly "opened" economy. Happily ignoring the fact that the economy was actually still within the tight control of central bureaucratic planners, they poured billions of dollars ( at least 300 billion ) into deals and joint-ventures that never bore fruit.

The "dream" domestic market simply did not emerge, nor, according to Joe Studwell, is it likely to for the forseeable future. 900 million of the vaunted 1.3 billion consumers-in-waiting are peasants with little disposable income. Not included in China's rising unemployment figures are the 250 million landless peasants who roam the coastal cities desperate for work.

China's communist economics still preserve vast urban industries, obsolete state-owned enterprises which devour resources. Most would be bankrupt in a genuinely open market, but Beijing's fear of instability from mass unemployment disallows this. SOEs survive on government-enforced bank-loans, as many as 70% of which are not merely non-performing, but will never be repaid, effectively written-of. China's record growth figures for the 1990's now look dubious, a combination of government pumping and blatantly falsified statistics. The few companies that did well, and a few did very well indeed, were mainly owned by Hong Kong and Taiwan Chinese exploiting the mainland's cheap labour force for low value-added manufacture and assembly. Geared to export, this did not contribute much to the moribund domestic economy. The huge SOEs claim 40% of China's total exports, but these, such as steel ( a bone of contention with the USA since China joined the WTO ) are mainly dumped abroad at artificially low prices, subsidised by a government which cannot pay SOE pensions, welfare or unemployment benefits.

The few foreign companies that profited in China made things like mobile phones, which the Chinese could not yet make for themselves. Or else simply ignored all the bureaucratic hurdles and license requirements by operating illegally.

Studwell's detailed history of the "dream" shows that China's economy is in serious danger of collapse under the weight of state-perpetuated debt, due to central control of every aspect of the economy. The obsession with secrecy, political interference and routine falsification results in massive corruption throughout, from village level to the uppermost ranks of the Party membership ( including, famously, the families of both Li Peng and Jiang Zemin ). Millions of dollars disappear into officials' pockets. The governments "reforms" simply shuffle bad debts from one sector to another, while being counted as assets. The banks survive on the confidence and savings of the masses, who are only permitted to invest within China. Unless, of course, they are Party members or government officials.

China's recent WTO membership might rekindle faith in the "dream," but the debt-encumbered domestic economy is not improved by signing treaties. If anything, it is put under worse pressure by foreign competition ( when foreigners are allowed to compete ). It will stagnate as long as the bureaucracy and Party retain their stifling grip.

Joe Studwell closes with the salutary tale of General Motors, who invested US$750 million to produce Buicks in Shanghai for the Chinese domestic market. Hoping to sell 1 million cars annually by the year 2000, they peaked that year at a mere 30,000, with declining sales since. GM still hopes to make it in China, by the year 2025!

"The China Dream" is an extraordinary book. Even if you don't know your GDP from your pet gerbil, its sheer pace, detailed research, and exemplary clarity make it an enthralling read. A must-have for every Board Director and CEO who thinks China offers easy money to the fortune-hunter. Compulsory reading for every politician who kowtows to China for a share of the mythical loot.


Very good Read   August 31, 2006
V. Kellon Robinson
0 out of 1 found this review helpful

This book is a must for those traveling to China. Gives a detailed look at the history of the Chinese market. Is a great precursor to visiting ex-patriots