Customer Reviews

From Wall Street to the Great Wall: How Investors Can Profit from China's Booming Economy

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In a very systematic and detailed manner (though sometimes with very 'old news'), the authors provide a thorough historical, macro-economical and political context for China's amazing growth. Considering that the book was released around the same time as Roger's book (A Bull in China: Investing Profitably in the World's Greatest Market, comparisons are inevitable and worthwhile.

So, first the comparison - Rogers' book takes a more conversational travelogue-like approach to providing a detailed analysis of key players in different sectors (each sector typically gets its own chapter). This book takes a more traditional descriptive mode of providing a wider context (historical and political) and discusses specific investing strategies for different risk profiles. While some concepts and themes are apparently common, luckily, the authors in these two books manage to provide information on different facets of the same theme....so, in a way, commonality of themes notwithstanding, the books are fairly complementary to each other. So, is it worth buying both? The answer is a tentative YES. If you are more interested in developing an excellent watch list of companies for each sector and understanding their landscape, you will find Roger's book more useful. If you want to understand different trading/investing strategies and asset allocation strategies for China component of your portfolio, based on stocks and ETFs, you will find book more useful and relevant. So, read both, but certainly prioritize according to the above comment.

Now, for the detailed review of this book. The authors present their ideas in three sections. The first one discusses the historical context, accomplishments, and an assessment of the inherent real and "perceived" risks of Chinese investments. It is not often that an investment themed-book talks in detail about the history of an country/economy/polity. The authors provide an excellent snapshot of the Chinese history through four periods - Confucianism, Colonialism, Communism, and Capitalism. As cute as the classifications sound, the discussion is worthwhile and informative (relevance to the modern day investor is not apparent, but then, no harm in knowing some history of one of the oldest civilizations from an economic perspective, right?). The authors then provide a catalog of old and recent achievements of the Chinese polity/economy using a wide assortment of well-cited statistics and interesting examples (of all things, mannequins for bra fitting is cited in a section highlighting adaptability). (For a more detailed and interesting discussion on different growth strategies of Chinese companies, the reader may benefit from Dragons at Your Door: How Chinese Cost Innovation Is Disrupting Global Competition). The third chapter in the section provides an excellent discussion on the risks of investing in China.

In the second section (4 chapters) focusing on 'investments', the authors discuss the stock market characteristics of China, a discussion on valuation of Chinese stocks and other asset classes. The discussion on market efficiency reads a bit like "old wine in new bottle" and may be of particular interest only to those who have not been exposed to market efficiency theories before. Those two chapters could have used more editing. For the reader interested in buying the book by Rogers cited earlier, these two chapters cover mostly the same ground, though with slightly different emphasis. The chapter on valuation of Chinese companies is a stand-out in this section.

The third section, in 5 chapters, provide the reader with specific strategy options for investing in China based on risk profiles. The authors provide detailed discussion on a varied set of investment strategies - investment in China-centric mutual funds, investment in companies which will benefit from China's growth, a riskier option of buying Chinese stocks directly, and a last option of what the authors call an "mixed strategy providing best balance" of risk/reward. The investment vehicles mentioned in the book in itself are familiar to any serious market observer or investor, but the discussion on diversification and specific asset allocation strategies using ETFs provide an interesting set of ideas. The book by Rogers provide a far more detailed look at specific sector/companies, while this book provides strategies primarily based on ETFs/funds. Some portion of this section, such as a discussion on dollar cost averaging, sound like a broken record, and could have used some careful editing. Nevertheless, a detailed and informative discussion on asset mix and allocation strategies. These chapters and an earlier one on risk are perhaps the highlights of this book.

Though the book ends on a very cliche'd tone ("No well-diversified investment portfolio can afford to ignore the investment opportunities that China offers"), the message is clear, well-articulated and almost always to-the-point. Certainly not as 'technical' or gravitas-inspiring as the book that made the author famous, so, Malkiel purists may find the book a little underwhelming. A serious investor, would however, benefit from the detailed discussion. A great addition.

Knowing that Malkiel is the father of efficient market hypothesis and wide diversification, I find it somewhat surprising that he has written a book on investing in a specific country. The brief summary of China's culture and history gives some background on how China found itself in the turmoil of the Cultural Revolution and why it lacks qualified accountants and financial analysts (an entire generation sent for reeducation).

The chapter covering risks is titled "Perceived Risks", and Malkiel basically debunks most of them as fiction or explains away the risks by pointing to the cultural pride, work ethics, and other factors to overcome them. It seems one-sided much like apologetics and boosterism. Maybe I'm skeptical, but it's not a foregone conclusion that China will avoid all their problems, political, social, economical, and become the dominant economy in the world. And no stock market only goes up.

What Malkiel does a good job of is explaining the tests of efficiency for Chinese stocks. He explains the alphabet soup of A share, N share, H shares, and concludes that as of 2005 the N and H shares a pretty efficient. However the A share market is still inefficient and subject to manipulation. He also explains the discrepancy of pricing between shares of the same company in the different exchanges. Furthermore it is confusing how to analyze the earnings, growth, profitability of state owned enterprises, who are 70% owned by the government and only float a small percentage of their shares on three different exchanges where they are all priced or bundled differently.

He concludes with several strategies for small, medium, large investors, with portfolios of ETFs and/or index funds. And for the true speculator he covers a few of the stocks in each industry. But as in any book, the information will be woefully old and out of date by the time it is published, printed and read. For the average investor who wants to have an exposure to China, I would personally buy a mixture of China index funds (GXC, FXI) Vanguard Emerging Market Index (VWO), but don't let that be your entire portfolio. Malkiel recommends a percentage based on your risk tolerance. For this wisdom, I don't think you need to buy the entire book, unless you want to learn about the various ways stock is available (Chapter 4).

In my opinion, this is an excellent guide for any individual investor who feels he (she) may want to "profit from China's booming economy." Even if the reader decides not to invest in China, the account of how far China has come in a period of approximately three decades is an interesting and amazing read.

The book is divided into three sections: The Setting, which provides a historical background on China and its people; The Investments, which explains how Chinese securities are structured and traded; and The Strategies, which provides advice as to how investors might go about investing in China's economic success.

The final chapter, The Optimal Investment Strategy, presents the authors advice as to how an individual investor might pursue an investment plan and at the same time minimize risk. The authors throughout the book emphasis risk and in the final chapter clearly state, "We warn you in advance that it is not an exciting strategy that will make you a millionaire shortly after reading it - but it is a strategy that sharply curtails your risk."

Another reviewer of this book has made comparisons of this book with Jim Rogers' A Bull In China. In my opinion, From Wall Street to the Great Wall is a far superior read. Burton Malkiel has the academic credentials and decades of experience in teaching investing to students. He has also been on the board of directors for many years at the Vanguard Group, a company dedicated to the best interests of individual investors. The average investor would be foolish to invest directly in Chinese companies as Mr. Rogers suggests. That would be like walking through a mine field. I suggest sticking with the advice of the professor.

This is another book that is based on incorrect statistics.The World Bank,in 2007,completely revised its statistics on a large number of countries,including China.China 's gdp(gross domestic product)is NOT in the $10-$11 trillion range ,as opposed to the nearly $13 trillion gdp of the United States.China'a gdp is no larger then $6 Trillion.

There are other claims in this book that revised World Bank statistics do not support.The middle class in China is substantially smaller than estimated in the past.The yearly economic growth rate published by China is significantly inflated.The Chinese stock market is a vastly overvalued bubble that is likely to collapse.

Malkiel simply failed to do his homework.He accepted statistics that were too good to be true.It is simply not the case that China is set to overtake the United States as the world's largest economy based on gdp projections.

Malkiel needs to significantly revise this book in the near future so as to avoid spreading information that is not correct.It is a well known fact that many Third World and Second World countries compile statistics that are riddled with error.The error committed in vastly overestimating China'a gdp and economic growth rate appears to be similar to the large overestimates made of economic growth in the Soviet Union in the 1940's and 1950's.

Readers should note that India's gdp and economic growth rate have also been revised down substantially by the World Bank.

As always, Malkiel's mantra is to diversify broadly. In all editions of his famous "A Random Walk Down Wall Street", he urges people to invest according to their means and situations, to diversify their investments across industries, and also to diversify internationally.

But why write a whole book about one national economy if your mantra is to diversify across them? It's because, quoting the authors, "there is no question that China will shortly surpass the United States and once again become the world's mightiest economic power". As such, Chinese assets deserve a special place in anyone's portfolio.

The book gives a very brief account of Chinese history, followed by an overview of the Chinese investment markets, and finally a collection of investment strategy. Of these, Malkiel only recommends one (diversify broadly within China, invest regularly rather than all at once) but he describes other viable strategies for people with a higher appetite for risk.

It's open to debate whether the Chinese will come out on top in the near future. After all, as we can read in China's most famous work of literature "empires wax and empires wane". But given that China has the world's oldest continuing, recognizable national identity, given that she is becoming freer and freer, and given that China is intensely motivated at all levels to improve herself, it would be foolish and dangerous to dismiss her.

Vincent Poirier, Dublin

Burton Malkiel is a professor of economics at Princeton and author of the classic A Random Walk Down Wall Street. This book is a practical guide how to invest in China. Malkiel offers specific advice such as what percent of your portfolio should be invested in China, what ETFs are best and how to indirectly play China's growth.

China is the place to be with your investments for the next 100 years. Don't miss out on this opportunity. You will need the extra growth in your investments to keep pace with the world growth in GDP and the subsequent rise in inflation.

As a Financial Advisor I am always looking for different ideas/opportunities to incorporate into my clients' investment portfolio.

While at the library with my son, this book and the title caught my eye and I immediately began reading the book thus checking it out.

It is a fine read that begins with the history and politics of China and eventually leading into the markets, its efficiencies and some particular investment options/strategies to capture, what has been and should continue to be,an economic boom in China.

It is a good, easy and enjoyable read but you must take the authors' somewhat biased opinions with a grain of salt - as with anything.

I do agree that there is a huge opportunity for profits and a place in one clients' portfolio for an investment in China and have over the last few years been adding such.

I would recommend this book.

Malkiel's book, whatever its value may be as a guide to foreign investment in China's financial markets (and in that respect it's probably quite good), is completely silent on all issues concerning whether or not a repressive political regime should be supported by financial investments from outside that serve to prop up and perpetuate it.

While large numbers of dissidents who have sought to make China more democratic languish in its jails, and others with similar aims have been tortured and/or killed, Malkiel apparently readily forgives and forgets both that and the Beijing massacres related to the 1989 Tiananmen Square demonstrations. It may be that Malkiel's position is not so far a cry from that of American and European enthusiasts for Hitler in the 1930's who, notwithstanding the concentration camps et al, in the initial stages of Hitler's dictatorship found his economic policies to their liking, since at the time Germany had again begun to thrive as an economic power.

Wang Dan, one of Tiananmen's student leaders who spent 7 years in jail and is currently not allowed inside China, characterized the so-called Beijing Doctrine (essentially, the world view of the modern Chinese state) this way in 2009: "For the sake of economic improvement, everything can be done, even killing people ... [such a doctrine shows that] the Tiananmen Massacre is still going on, only in different ways: it was the students' lives being taken physically in 1989, but it is the mind of the world being poisoned spiritually today."

Moreover, the reaction of the Chinese government to the recent awarding of the 2010 Nobel Peace Prize to Liu Xiaobo underscores that Malkiel is basically telling us that for the sake of personal profits it's quite okay to turn a blind eye to a government that views non-violent advocates of democratic reform as 'criminals' and throws them in jail for it, and to the prevailing policies that govern every day life in a country in which even those dissidents who aren't incarcerated are continuously persecuted.

By promoting China's investment possibilities while ignoring the repressive reality of China, above all its ongoing victimization of large numbers of innocent persons, Malkiel contributes to this spiritual poisoning. As such, Malkiel comes across as a mere financial technocrat, oblivious to anything besides promoting strategies for personal financial gain.

The process of reading this book was very happy. It's really a very useful book to indicate me to invest in China no matter in the bull market or other types of the market.