By Lauren Otis, Business Editor
Asia has had its share of nations which have grown into economic powerhouses — Japan and South Korea most prominently — but nothing compares to the surging economic behemoth which is China today.
A new book by Princeton University economics professor Burton G. Malkiel has recently been published which seeks to give Western investors an insight into, and ability to participate in, China’s incredible economic expansion. The book “From Wall Street to the Great Wall: How Investors Can Profit from China’s Booming Economy” was written with Patricia Taylor, a Princeton-based freelance writer, and co-authored by Jianping Mei, a former graduate student of Mr. Malkiel’s, and Rui Yang, a fund manager for a large Chinese mutual fund company.
The recent growth of the Chinese economy “has been unprecedented in history,” said Mr. Malkiel, who is also the author of the bestselling book “A Random Walk Down Wall Street.” “It has been almost 10 percent (annual growth) for 20 years. There is no historical antecedent, and that’s after inflation, it is really a remarkable place,” he said.
”I was familiar with some of the statistics, but when you are there, the excitement, the energy is really quite remarkable,” said Mr. Malkiel, who along with Ms. Taylor was invited to visit China for an extensive all-expenses-paid trip by Mr. Yang’s employer as part of the research for the book. Mr. Malkiel said the book is dedicated to the men and women of China who have contributed to the country’s unprecedented growth.
In China, two things struck him, Mr. Malkiel said. “For me the most striking thing was this feeling of an almost palpable energy. You just can’t walk down the street in Beijing or Shanghai without feeling that enormous energy,” he said, adding “I say it makes New York look like a sleepy town.”
He was also struck by the fact that China’s government was not how he imagined it to be — a huge, monolithic, Communist government which dictated rigid policy to the whole country from above. Instead, government oversight was diffuse, and there was plenty of regional autonomy, with different regions of the country having their own characteristics and competing with other areas, Mr. Malkiel said.
In many ways, government oversight was similar to that in the United States, with one branch of government interested in executing a certain policy — he cited the Chinese equivalent of the Securities and Exchange Commission — but being questioned by and having to contend with the not necessarily similar policy desires of other government bodies, like the Chinese finance ministry or central bank, Mr. Malkiel said.
Mr. Malkiel said his interest in China’s robust economy was cultivated by Mr. Mei when Mr. Mei was a graduate student of his. “He and I first wrote an article about this in one of the investment journals,” Mr. Malkiel said, and the idea for a book grew from there. Mr. Mei, a resident of West Windsor, is currently teaching at the Cheung Kong Graduate School of Business in Beijing.
According to Ms. Taylor, who has collaborated with Mr. Malkiel on book projects for many years, the conclusion the book draws is “the biggest risk to any portfolio is to not have any China exposure.” It includes a “go for broke” chapter, recommending 11 Chinese stocks that are risky but have a large potential upside, she said, as well as generally detailing mutual fund investments and other ways an individual investor can benefit from the Chinese business boom.
The scale and breadth of China’s economic success is huge, Mr. Malkiel said. “They are manufacturers to the world” for low-tech goods, yet the country is also “going gangbusters” in the realms of high technology and e-commerce, he said. He cited Baidu.com, which he termed the Chinese Google, as charting “literally explosive growth” in just one example.
Mr. Malkiel acknowledged the environmental cost of China’s growth, including the country’s dumping of unprecedented amounts of carbon dioxide and other greenhouse gases into the atmosphere, but said that dire portrayals of the country’s environmental record such as a recent series in the New York Times were an exaggeration.
”There’s no question that there are severe environmental problems,” associated with China’s rapid economic growth, but there were also efforts being made to counter the problems, Mr. Malkiel said. “They will probably, over the next five years or so, put more money into nuclear power plants than any other country in the world,” he said.
The Chinese government is taking steps to control industrial pollution, such as through using its control of the nation’s banking system to not grant loans to the worst polluters, he said. And, alternative, green energy sources are being pursued. “They are probably, in terms of technology for solar panels and solar power, one of the leaders in the world,” Mr. Malkiel said.
”They are aware of it. What I find incouraging is there are people who really care, and are working to do something about it,” said Ms. Taylor, of Chinese pollution.
Ms. Taylor said endemic corruption in China was the most significant drag on the economic expansion and conducting business. “Corruption is the cancer that can destroy society, it is rampant,” she said.
The book describes how investors who wish to invest in Chinese company’s but want the comfort of an appropriate level of disclosure and financial reporting, may want to invest in Chinese companies whose stock trades on U.S. exchanges — which require adherence to certain reporting standards — in the form of American depository receipts, or ADRs, Ms. Taylor said.
The book examines Chinese culture and history as a way to give insight into the world of Chinese business and investments, said Mr. Malkiel. He termed the book, completely accessible to the general interest reader and investor.
”You’d learn a lot about China reading this book, but there is a lot of very practical investment advice for the individual” as well, Mr. Malkiel said.
The book “From Wall Street to the Great Wall: How Investors Can Profit from China’s Booming Economy,” is published by W.W. Norton Co., is 320 pages, and retails for $26.95.

