The Coming Collapse of China by Gordon C Chang<br></br>The China Dream by Joe Studwell

Gosh: "The coming collapse of China". Heady stuff, but not unlike my uncle Norbert. Saturday nights, uncle collapses at the bar. Come next weekend, he'll be ready for a repeat performance.

China, too, regularly collapses. It collapsed at the end of the Zhou dynasty in the eighth century BC, and at the end of every dynasty thereafter. Sometimes the cause was administrative decay; sometimes, as with the 13th-century Mongol invasions, the result of external aggression. In the 19th century, the two combined: a weakening of governmental sinew allied with Western predation, leading to the overthrow of the Qing dynasty in 1912.

It collapsed twice more in the 20th century: once in the face of Japanese expansion, then at the feet of Mao's communists. Yet somehow China is still there, outwardly set to take the world by storm come the 2008 Beijing Olympics.

Before then, Gordon G Chang – a second-generation Chinese-American lawyer – predicts another collapse. China's accession to the World Trade Organisation, sealed last November, will, he says, trigger cataclysm in 2005. Then, the People's Republic must finally abandon its protectionist practices.

Chang projects a precise scenario. The full advent of WTO rules will induce havoc in China's uncompetitive manufacturing and agricultural sectors, and a run on the banks. To save face, the government will order an assault on Taiwan. When this fails, China's students, professional classes and 900 million peasantry will take to the streets. The Communist Party, no longer able to depend on the army to murder its own, will pay the penalty.

Conceivably, Chang is right. Conceivably, China is overdue its next momentous upheaval. But the quality of his argument is suspect. When not recycling the overworn, he peddles the tendentious. Launching into a flailing diatribe against the state, he exhibits curious tolerance for the possibly subversive but definitely cuckoo Falun Gong cult, which currently has the security forces on high alert. Only then does Chang become, briefly, interesting.

There are good chapters on China's insolvent banking sector and ailing state-owned enterprises. He reveals that the republic's "big four" commercial banks, far from being independent wealth-producing entities, use the deposits of small-time savers to prop up insolvent industries on the orders of party bosses. In the same way, businesses seeking a listing on China's nascent stock exchanges must first "absorb" non-viable companies.

Given the want of credible investment opportunities, such Shenzhenigans are indeed potentially ruinous – the more so in view of an ingrained culture of secret dealing. But whether, also given China's immemorial sufferance of authoritarian rule, the same implies imminent meltdown is pure speculation.

Chang's case might be more persuasive if his exposures were supported by an equally telling deconstruction of the military involvement in shady business ventures, or in the state of China's utilities. Instead, when not berating Jiang Zemin for lack of vision, Chang contents himself with extolling such paragons as Chen Rong, a notorious Shanghai millionaire who made his bucks manufacturing equipment for ten-pin bowling alleys.

Driven by expatriate vehemence, Chang probably considers Margaret Thatcher an apostle of the command economy. In a telling phrase, he refers to "mangy foreign correspondents". Whether Joe Studwell qualifies as one of these can only be surmised. Studwell, editor of the Chinese Economic Quarterly, spent the Nineties as a freelance journalist in Hong Kong and Beijing. In Chang's book, that probably sets him ten thousand seats below the salt. But Studwell's book is the real McChoy.

The China Dream is a finely researched, important and cautionary contribution to our understanding of contemporary China, not least because of its mature grasp of Chinese history. Having set the scene by summarising previous encounters between Western avarice and Chinese determination to defend the domestic market, the author charts superbly the "liberalisation" of China's economy since Mao's death in 1976.

Studwell seems to have all the facts at his fingertips. His is not just a big-picture account, but a whole-picture account. He knows about the army, and utilities. He understands the international setting. If, by 2000, outsiders had invested an unprecedented $350bn in China, that was because in 1992 – when Deng Xiaoping mounted an absurdly effective campaign to revitalise interest in the wake of Tiananmen Square – there was, as Studwell reminds us, virtually nowhere else for global capital to go. Western economies were stagnant, and the latest white hope, Russia, was already floundering.

Much inward investment came from expatriate Chinese tycoons in the Far East. But as much emanated from America and Europe. One by one, the greatest Western businesses queued outside the Politburo's doors, wallets in hand. And one by one they were badly burned.

China had no intention of paying a cent more than it had to for the technology transfer vital for repackaging the country as a modern power. A few companies, notably McDonald's and the phone giants Nokia, Ericsson and Motorola, prospered. So has boot-licking Rupert Murdoch. But their success only encouraged such multi-million dollar losers as McDonnell Douglas and Goldman Sachs. In retrospect, it was the greatest sting of all time.

Yet, even now, interest in China is rekindling, with China's value as an ally against Islamic fundamentalism clocked. As Studwell declares, the allure of a market comprising a quarter of mankind has been too tempting to ignore, for all that 80 per cent of China's population is too poor to afford Western consumables and likely to remain so.

Like Chang, Studwell observes the plight of China's banking system and its public sector enterprises, and concedes stern troubles lie ahead. But he does not believe WTO entry will necessarily induce an unravelling. One way or another, Beijing's bureaucracy will find ways to obfuscate free-trade prescriptions. So China will go on muddling through.

Internally, the omens are less propitious. Among many Chinese there is growing dismay at the endemic lack of governmental accountability. Jiang's groomed successor, Hu Jintao, slated to be in the hot seat by 2003, is an ideologue whose credentials include high office in Tibet. To the party's progressive arrivistes and corrupt placemen alike, he may prove less than acceptable. Conversely, memories of revolutionary upheaval are sufficiently fresh to deter repetition. In Studwell's steadfastly sober assessment, any prophecy is simply silly. Reality, he says, is the mess in the middle.