Beware the Chinese Miracle
Those who foolishly sought power by riding the back of the tiger ended up inside. – John F. Kennedy
Desmond Shum’s message for investors is clear: Institutions matter, and beware the siren song of the Chinese economic miracle.
One can think of Red Roulette: An Insider's Story of Wealth, Power, Corruption, and Vengeance in Today's China, Shum’s revelatory behind-the-scenes account of the life and death struggle for money and power in the People’s Republic, co-written with John Pomfret, as three different books.
The first describes how Shum, the issue of a family rendered bitter and poor because of its landlord background in post-revolutionary Shanghai, leverages his height, good looks, and athletic ability into a scholarship to Hong Kong’s Queens University, where his latent quantitative skill blossoms, launching him into what, in any other developed nation, would have been a conventional career in high finance.
The book’s other major character, Whitney Duan, grew up as the stepdaughter of a small-town official in Shandong province, just southeast of Beijing. Whitney and Desmond met in Beijing, conducted a long-term relationship, and eventually tied the knot. But their union is much more a business partnership than a conventional marriage. Not until they had become a well-established item does Whitney take Desmond to dinner with her mentor, Auntie Zhang. The meal, Desmond soon realizes, is his life’s most important job interview. He passes with flying colors, at which point Whitney reveals to Desmond Auntie’s real identity as the wife of Wen Jiabao, a high party official who would eventually become China’s premier.
The second, and major, section of the book documents how Whitney and Desmond became billionaires via a heady brew of Desmond’s financial nous, leverage, and, most of all, Whitney’s connections – guanxi – via Auntie Zhang.