Revisiting China

IT WOULD HAVE BEEN IMPOSSIBLE FOR ME, as a member of the staff assigned to the young U.S. liaison office in Beijing in 1975, to envision that China’s ponderous state-run command-and-control economy could be transformed to compete in the 20th century. In Dealing with China Paulson pro- vides exclusive background and insight into the process of this transformation. The book is a first- rate insider account of how Goldman Sachs—with Paulson at the helm—collaborated with its Chinese

counterparts to force reluctant economic manag- ers to adopt Western rules on managerial control, accounting regulations and banking best practices in the early 1990s.

Starting with paramount leader Deng Xiao- ping’s exhortation to enact changes “by crossing the river by feeling the stones” and explore new market-oriented reforms, Chinese leaders moved forward boldly. Paulson details the dates, places, times, principal actors and substance of these negotiations. He attributes Goldman’s success in negotiations with his Chinese colleagues to recogniz- ing “an apparent preoccupation [of the Chinese] with rank…where trust and face must be preserved.” Building personal relations was key. Although Paulson refrains from commenting on this, readers should know that his Chinese “clients” were members of the Chinese Communist Party, whose iron rule over China is maintained by the equivalent of a KGB clone. Few that Paulson dealt with had to worry about a midnight knock on the door.

When Paulson left Goldman Sachs to become secretary of the U.S. Treasury in 2006, his preoccupation with China did not diminish. He was responsible for coordinating the “Strategic Economic Dialogue” (SED) between the United States and China. The chief spokesman during the ensuing five SED meetings, he describes the difficulties in forging a new economic relationship with China. Dry and technical at times, Paulson’s prose is also fluid, precise and readable. For those who want to understand China’s current economic rise to power, this book will not disappoint.

Dealing with China: An Insider Unmasks the New Economic Superpower TWELVE 448 PP. $22

ROBERT D. BOOTH, who has lectured at Dartmouth and advised students in the College’s China-related programs, is author of State Department Counterintelligence: Leaks, Spies and Lies (Brown Books, 2014).