Good Reading -- July 2013

July 18, 2013

I hope everyone is having a good summer. Always feel free to send me an email with suggestions or feedback on this reading. Hope you enjoy it. -- Phil

 

Facts and Figures

  • As of early July, NYSE margin debt is up 65% in 2013 to a record $384 billion, topping the prior high of June 2007. (JP Morgan)

  • JPM (5.28.13): "The number of companies listed on US exchanges announcing a dividend increase rose this year to the highest level since 2004.  The total yield, the sum of dividends and announced share buybacks divided by equity market value, currently stands at 4.4% for US equities vs. 3.7% for Global equities.  Around 2.5% of the $15tr universe of US non-financial equities is currently withdrawn per year due to share buybacks, boosting EPS and other equity ratios. Had the Divisor remained constant since Q3 2011, the 4-quarter rolling S&P500 Operating Earnings-Per-Share would have only risen by $1.50 instead of the reported $3.70 increase. The S&P500 Operating EPS has risen from $94.60 in Q3 2011 to $98.30 in Q1 2013."  

    • Market-wide cash dividend payments were up 15.5% in 1Q13 compared to the prior year and the forward-yield is at another all-time high. But the payout ratio was near 36% vs. the long-term average of 52%. (S&P)

Links

  • "The Warren Buffett Special" -- A  great collection of articles from Joel Greenblatt, Tom Russo, Robert Hagstrom and others. Highly recommended. 

  • "China's Great Uprooting -- Moving 250 Million Into Cities" -- A fascinating interactive feature. The trend started in the early 1980s when China was 80% rural; now 50% of people live in cities, and this effort would take the total to 70% by 2025. The upshot is that this effort entails the creation, from scratch, of new city space equivalent to the combined populations of most of the major urban areas in the world (see video). Highly recommended. 

  • "Wal-Mart's Super-Counterintuitive Health Care Plan" -- Thanks to Jeff L. for finding this article about "travel surgery" in the quest to lower costs and get better results. 

  • "Louis Gerstner Lays out His Post-IBM Life" -- A great introspective interview with "the man who saved IBM." Thanks to Craig M. for finding this. 

  • "Fastow: Enron Didn't Have to Go Bankrupt" -- Former Enron CFO Andy Fastow said, among other things, that fraud is currently "ten times worse" than it was during Enron's time, and that "transactions today make me blush, and I was the CFO of Enron." 

  • "Singapore Needs a New Sling" -- This is an interesting take, and it comes from a cool website. If you're interested in Singapore this a good book. 

  • An Interview with Daniel Kahenman -- Video and the transcript of a nearly hour-long interview conducted by Morgan House and covering "hindsight bias, unjustified optimism in the financial industry, and why you should think of your brain like a newsroom publishing a daily paper."

  • Charts, Maps and Infograhics -- A simple blog that publishes all of the visual information from each week's issue of The Economist. I'm sure a lot of people already know about this, but I thought it was great to have this all in one place. 

Books

  • "The World Until Yesterday" -- Jared Diamond's latest book, which was just released. If you liked "Guns, Germs and Steel" and "Collapse," you'll want to read this one too. I thought it was pretty good, although it's certainly a little preachier than the first two. 

    • Bill Gates is also reading it and will review it on his excellent blog. 

  • "Debtor's Prison" -- I haven't read the book yet, but this review by Roger Lowenstein seems spot on. 

Articles

  • "The Intelligent Investor: Saving Investors From Themselves" --  A masterpiece from Jason Zweig to celebrate the 250th edition of his column. 

  • "Fitch Says China Credit Bubble Unprecedented in World History" -- The story remains the same, although it's interesting that even Fitch is taking notice and it's worthwhile to point out (again) that new credit creation is a massive portion of reported GDP and that much of that credit is increasingly in the 3-6 month shadow market. 

  • "The Federal Reserve's Framers Would Be Shocked" -- An op-ed from Roger Lowenstein about the history of the Federal Reserve. He's writing a book about the same subject that I can't wait to read. It's not due out until 2015, but I'm sure it will be worth the wait. 

  • "Golf in China..." -- This is article will interest anyone who follows China or golf or both, but anyone who read Robert Greene's book "Mastery," which I've previously mentioned and recommended, will also appreciate it. "[T]raining with ferocious intensity...is a small but growing band of younger Chinese golfers" who are starting as toddlers and now beginning to win international tournaments. "[T]hese boys and girls, whether driven by desire or family pressure, often train nonstop, with very few days off, under a parental discipline that can rival the toughest coaches in the Chinese sports system...China is producing some of the world's best young golfers because wealthy families are...pushing kids to specialize early and then having them chi ku, or "eat bitterness," with relentless training."

 

The Intelligent Investor: Saving Investors From Themselves

 

 

Editor’s note: Jason Zweig recently wrote his 250th “Intelligent Investor” column for The Wall Street Journal and shortly thereafter won a Gerald Loeb Award, considered the most prestigious in business journalism, in the Personal Finance category.

I was once asked, at a journalism conference, how I defined my job. I said: My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself.

That’s because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.

The advice that sounds the best in the short run is always the most dangerous in the long run. Everyone wants the secret, the key, the roadmap to the primrose path that leads to El Dorado: the magical low-risk, high-return investment that can double your money in no time. Everyone wants to chase the returns of whatever has been hottest and to shun whatever has gone cold. Most financial journalism, like most of Wall Street itself, is dedicated to a basic principle of marketing: When the ducks quack, feed ‘em.

In practice, for most of the media, that requires telling people to buy Internet stocks in 1999 and early 2000; explaining, in 2005 and 2006, how to “flip” houses; in 2008 and 2009, it meant telling people to dump their stocks and even to buy “leveraged inverse” exchange-traded funds that made explosively risky bets against stocks; and ever since 2008, it has meant touting bonds and the “safety trade” like high-dividend-paying stocks and so-called minimum-volatility stocks.

It’s no wonder that, as brilliant research by the psychologist Paul Andreassen showed many years ago, people who receive frequent news updates on their investments earn lower returns than those who get no news. It’s also no wonder that the media has ignored those findings. Not many people care to admit that they spend their careers being part of the problem instead of trying to be part of the solution.

My job, as I see it, is to learn from other people’s mistakes and from my own. Above all, it means trying to save people from themselves. As the founder of security analysis, Benjamin Graham, wrote in The Intelligent Investor in 1949: “The investor’s chief problem – and even his worst enemy – is likely to be himself.”

One of the main reasons we are all our worst enemies as investors is that the financial universe is set up to deceive us.

From financial history and from my own experience, I long ago concluded that regression to the mean is the most powerful law in financial physics: Periods of above-average performance are inevitably followed by below-average returns, and bad times inevitably set the stage for surprisingly good performance.

But humans perceive reality in short bursts and streaks, making a long-term perspective almost impossible to sustain – and making most people prone to believing that every blip is the beginning of a durable opportunity.

My role, therefore, is to bet on regression to the mean even as most investors, and financial journalists, are betting against it. I try to talk readers out of chasing whatever is hot and, instead, to think about investing in what is not hot. Instead of pandering to investors’ own worst tendencies, I try to push back. My role is also to remind them constantly that knowing what not to do is much more important than what to do. Approximately 99% of the time, the single most important thing investors should do is absolutely nothing.

There’s no smugness or self-satisfaction in this sort of role. The competitive and psychological pressure to give bad advice is so intense, the demand to produce noise is so unremitting, that I often feel like a performer onstage before a hostile audience that is forever hissing and throwing rotten fruit at him. It’s hard for your head to swell when you spend so much of your time ducking.

On the other hand, you can’t be a columnist for The Wall Street Journal without a thick skin. I have been called an ignoramus, an idiot and dozens of epithets unprintable in a family newspaper;
accused of front-running or trading ahead of my own columns;
assailed as being in the pockets of short-sellers betting against regular investors; described as being a close friend of a person I’ve never met in my entire life;
decried as being biased in favor of high-frequency traders and as being biased against them;
and told, almost every week, that I lack even the most basic understanding of how the financial markets work.
The perennial refrain from critics is: You just don’t get it. Internet stocks / housing / energy prices / financial stocks / gold / silver / bonds / high-yield stocks / you-name-it can’t go down. This time is different, and here’s why.

But this time is never different. History always rhymes. Human nature never changes. You should always become more skeptical of any investment that has recently soared in price, and you should always become more enthusiastic about any asset that has recently fallen in price. That’s what it means to be an investor.

When, in the fourth quarter of 2008 and 2009, I repeatedly urged investors to hold fast to their stocks, I was called a shill for Wall Street and helplessly naïve.

When I took a skeptical look at Congressman Ron Paul’s gold-heavy portfolio in December 2011, angry readers called me “weak minded,” “ignorant,” “pathetic” and a member of “the big bank lobby.” (Gold was around $1,613 per ounce then; it was last sighted this week sinking below $1,230.)

When, only a few weeks ago, I warned that any hints of a tighter policy from the Federal Reserve could crush recently trendy assets like real-estate investment trusts, high-dividend stocks and “low volatility” stocks, readers protested that I didn’t even know the difference between a rise in interest rates and “tapering,” or a decline in the rate at which the Fed buys back bonds. I know the difference – but, with many of these assets down by up to 10% since then, it isn’t clear that all investors knew the difference.

Every columnist knows that if you ever write something that didn’t make anybody angry, you blew it. People don’t like having their preconceived notions jolted, and doubt and ambiguity are alien to the way most investors think.

That’s why I’m realistic. I don’t ever expect to convert all my readers to my viewpoint. I would be a fool to think I could. But I’d be a worse fool if I ever stopped trying.

So you can understand exactly where I am coming from, I will tell you a story.

My senior year of college, my father was dying of lung cancer. Most weekends, I would take the train up from New York City to Fort Edward (then the nearest train station to where I grew up in rural upstate New York).

On one of my last visits, even as my father was in severe pain, he asked me the same question he always did: What are you reading?

I fluffed my feathers a bit and said: Kierkegaard. “What is he telling you?” asked my dad. I had just been reading a volume of Kierkegaard’s journals on the train, immersed in the poetic ruminations of the great Danish philosopher. So I immediately spouted, verbatim and with the appropriate pauses for world-weary effect, the words I still remember to this day: “No individual can assist or save the age. He can only express that it is lost.”

Without a moment’s hesitation, my dad retorted: “He’s right. But that’s exactly why you must try to assist and save the age.”

In that one moment, my dad put a callow youth gently in his place, out-existentialized the great existentialist and gave me words to conduct a career by.

Only years later did I understand fully what he meant: We can’t assist or save the age, but the attempt to do so is the only way we have of even coming close to realizing some dignity and meaning for our lives. The longer the odds, the greater the obligation to try to beat them. That’s why I keep at it, even though I have profound doubts that most people will ever learn how to be better investors. I never expect everyone to listen; all I ever hope for is to get someone to listen.

I felt this firsthand in a former job in 1999 and 2000, when I wrote column after column warning people not to fling money at technology stocks and, in return, got hundreds of hate emails a week (often hundreds per day). It was grim, contrarian work, constantly refusing to tell people what they desperately wanted to hear – it was like trying to stop a hurricane by pushing against it with your hands.

The vindication came for me not when the Nasdaq bubble burst, but years later, when a hand-addressed envelope came in the mail. One of my columns was enclosed, folded again and again and frayed almost to tatters.

Across it, a reader from Minnesota had written by hand: “Dear Mr. Zweig: For a long time I have wanted to say thank you for writing this. The second I read this it made so much sense to me that I tore it out and folded it up and carried it around in my wallet. Whenever my friends started bragging about their trading profits I would excuse myself, go to the bathroom, pull this article out and read it again and it kept me out of trouble. I am returning it to you now because I don’t think I need it anymore, but I wanted you to know that I have carried it with me every day for years.”

No one writes letters anymore, of course. But I still get emails every week from readers telling me that something I wrote kept them out of trouble or helped them make sense of the market’s latest mad outburst.

I’ve had many honors in my career – being chosen as the editor of the revised edition of Graham’s The Intelligent Investor; spending two years helping the Nobel laureate Daniel Kahneman write his book Thinking, Fast and Slow; and, this month, winning the Loeb Award. But the greatest honor I have had is the abiding privilege of trying my best to serve our readers well. It isn’t always easy, and I don’t always succeed, but that effort is its highest reward an investing journalist can ever have.

— Write to Jason Zweig at intelligentinvestor@wsj.com, and follow him on Twitter:@jasonzweigwsj

Fitch says China credit bubble unprecedented in modern world history

China's shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned.

Fitch warned that wealth products worth $2 trillion of lending are in reality a "hidden second balance sheet" for banks, allowing them to circumvent loan curbs and dodge efforts by regulators to halt the excesses. Photo: Alamy

By Ambrose Evans-Pritchard, International Business Editor

4:12PM BST 16 Jun 2013

 

The agency said the scale of credit was so extreme that the country would find it very hard to grow its way out of the excesses as in past episodes, implying tougher times ahead.

"The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation," said Charlene Chu, the agency's senior director in Beijing.

"There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling," she told The Daily Telegraph.

While the non-performing loan rate of the banks may look benign at just 1pc, this has become irrelevant as trusts, wealth-management funds, offshore vehicles and other forms of irregular lending make up over half of all new credit. "It means nothing if you can off-load any bad asset you want. A lot of the banking exposure to property is not booked as property," she said.

Concerns are rising after a string of upsets in Quingdao, Ordos, Jilin and elsewhere, in so-called trust products, a $1.4 trillion (£0.9 trillion) segment of the shadow banking system.

Bank Everbright defaulted on an interbank loan 10 days ago amid wild spikes in short-term "Shibor" borrowing rates, a sign that liquidity has suddenly dried up. "Typically stress starts in the periphery and moves to the core, and that is what we are already seeing with defaults in trust products," she said.

Fitch warned that wealth products worth $2 trillion of lending are in reality a "hidden second balance sheet" for banks, allowing them to circumvent loan curbs and dodge efforts by regulators to halt the excesses.

This niche is the epicentre of risk. Half the loans must be rolled over every three months, and another 25pc in less than six months. This has echoes of Northern Rock, Lehman Brothers and others that came to grief in the West on short-term liabilities when the wholesale capital markets froze.

Mrs Chu said the banks had been forced to park over $3 trillion in reserves at the central bank, giving them a "massive savings account that can be drawn down" in a crisis, but this may not be enough to avert trouble given the sheer scale of the lending boom.

Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. "They have replicated the entire US commercial banking system in five years," she said.

The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. "This is beyond anything we have ever seen before in a large economy. We don't know how this will play out. The next six months will be crucial," she said.

The agency downgraded China's long-term currency rating to AA- debt in April but still thinks the government can handle any banking crisis, however bad. "The Chinese state has a lot of firepower. It is very able and very willing to support the banking sector. The real question is what this means for growth, and therefore for social and political risk," said Mrs Chu.

"There is no way they can grow out of their asset problems as they did in the past. We think this will be very different from the banking crisis in the late 1990s. With credit at 200pc of GDP, the numerator is growing twice as fast as the denominator. You can't grow out of that."

The authorities have been trying to manage a soft-landing, deploying loan curbs and a high reserve ratio requirement (RRR) for banks to halt property speculation. The home price to income ratio has reached 16 to 18 in many cities, shutting workers out of the market. Shadow banking has plugged the gap for much of the last two years.

However, a new problem has emerged as the economic efficiency of credit collapses. The extra GDP growth generated by each extra yuan of loans has dropped from 0.85 to 0.15 over the last four years, a sign of exhaustion.

Wei Yao from Societe Generale says the debt service ratio of Chinese companies has reached 30pc of GDP – the typical threshold for financial crises -- and many will not be able to pay interest or repay principal. She warned that the country could be on the verge of a "Minsky Moment", when the debt pyramid collapses under its own weight. "The debt snowball is getting bigger and bigger, without contributing to real activity," she said.

The latest twist is sudden stress in the overnight lending markets. "We believe the series of policy tightening measures in the past three months have reached critical mass, such that deleveraging in the banking sector is happening. Liquidity tightening can be very damaging to a highly leveraged economy," said Zhiwei Zhang from Nomura.

"There is room to cut interest rates and the reserve ratio in the second half," wrote a front-page editorial today in China Securities Journal on Friday. The article is the first sign that the authorities are preparing to change tack, shifting to a looser stance after a drizzle of bad data over recent weeks.

The journal said total credit in China's financial system may be as high as 221pc of GDP, jumping almost eightfold over the last decade, and warned that companies will have to fork out $1 trillion in interest payments alone this year. "Chinese corporate debt burdens are much higher than those of other economies. Much of the liquidity is being used to repay debt and not to finance output," it said.

It also flagged worries over an exodus of hot money once the US Federal Reserve starts tightening. "China will face large-scale capital outflows if there is an exit from quantitative easing and the dollar strengthens," it wrote.

The journal said foreign withdrawals from Chinese equity funds were the highest since early 2008 in the week up to June 5, and withdrawals from Hong Kong funds were the most in a decade.

 

The Federal Reserve’s Framers Would Be Shocked

By ROGER LOWENSTEIN

 

 

ONE hundred years ago today, President Woodrow Wilson went before Congress and demanded that it “act now” to create the Federal Reserve System. His proposal set off a fierce debate. One of the plan’s most strident critics, Representative Charles A. Lindbergh Sr., the father of the aviator, predicted that the Federal Reserve Act would establish “the most gigantic trust on earth,” and that the Fed would become an economic dictator or, as he put it, an “invisible government by the money power.”

Had the congressman witnessed Ben S. Bernanke’s news conference last week, he surely would have felt vindicated. Investors, traders and ordinary citizens listened with rapt attention as Mr. Bernanke, the Fed chairman, spoke of his timetable for scaling down stimulative bond purchases. “If things are worse, we will do more,” he said of the nation’s economy. “If things are better, we will do less.”

In 1913, few of the framers of the Fed anticipated that the institution would do anything of the sort. The preamble to the act specified three purposes: to furnish “an elastic currency,” to provide a market for commercial paper so that banks would have more liquidity, and to improve supervision of banks. Regulating the economy was not among them.

The framers saw that the banking system needed reform, but they were sorely divided about how to go about it. Wall Street wanted a strong central bank — preferably under private control. Populists like William Jennings Bryan, Wilson’s secretary of state, insisted that banks answer to the public. But many people from the farm belt, like Lindbergh, were opposed to any powerful financial agency.

The backdrop to the legislation was that the United States, in the late 19th century, suffered frequent financial panics. In 1907, banks ran out of cash and the panic snowballed into a depression. The nation had no central reserve — no agency that, in a crisis, could allocate credit where needed. All it had was J.P. Morgan Sr., who arranged for a private loan syndicate. That was not enough, and, anyway, in the spring of 1913 Morgan died. Leading financiers, like Paul Warburg, a German immigrant who wanted to replicate the Reichsbank in his adopted home, thought the United States needed some coordinating agency. They thought that the system was too decentralized.

Many ordinary Americans disagreed. They thought banking was too centralized already, and that credit shortages were the fault of uncompetitive practices on Wall Street. Over the winter of 1912-13, Congress staged sensational hearings to unmask the “money trust” — a supposed conspiracy among the biggest banks. The hearings did not uncover evidence tying credit shortages to collusive behavior. They did establish that Wall Street tycoons were overly clubby with one another — especially in the distribution of securities — and not exactly beacons of free competition.

The Democrats, who won control of Congress in 1912, promised in their platform to free the country “from control or domination by what is known as the money trust.” What’s more, they specifically opposed the creation of a “central bank,” which the delegates saw as a stalking horse for the money trust.

THUS, supporters of the Federal Reserve legislation faced a delicate problem: how to fashion a centralizing agency and not run afoul of the strong popular sentiment against centralization.

Representative Carter Glass of Virginia, the chief sponsor of the Federal Reserve Act, embodied this dichotomy. Before 1913, his claim to fame was helping to draft a state constitution that had disenfranchised African-Americans. He was an ardent champion of states’ rights. Like most Southern Democrats, he wanted to restrain federal authority — in banking as well as in race relations. Laissez-faire Democrats since Jefferson and Jackson had opposed central banks, and Glass embraced that tradition. But he recognized a need for banking reform, and wanted a more elastic currency to avert money panics and moderate depressions.

His solution was to propose privately owned regional reserve banks that would be new centers of banking strength, away from Wall Street. Wilson horrified him by insisting that a Reserve Board sit atop the individual banks. To Glass, this federalist design looked too much like a central bank.

Then Wilson horrified Wall Street by insisting that Reserve Board members be named by the president, rather than by banks. “History and experience unmistakably show that governments are not good bankers,” hissed The New York Times, which typically toed the Wall Street line. The Washington Post accused Wilson of engineering “a colossal political machine.”

Facing Congress on June 23, Wilson touched a popular chord when he said banks should be “the instruments, not the masters, of business.” But he also said that “our banking laws must mobilize reserves.” This had been Warburg’s main goal — to pool banking reserves so they could be tapped as needed.

Historians still debate what the Fed’s framers intended because many details were left vague, and the Fed evolved over time. When the act was signed, in December 1913, few anticipated that the Federal Reserve Board would become so central to the economy, though it did have authority over interest rates. And Glass pledged that the new agency would be restrained by the requirements of the gold standard — which the nation eventually abandoned.

The current Fed would dismay the framers. Glass would be shocked at the power of Mr. Bernanke. Warburg might applaud the Fed’s efforts to temper a recession, while frowning on its printing of “fiat money.”

For some of the same reasons, “end the Fed” is a rallying cry among Tea Partyers, and among critics with a fondness for the gold standard. Representative Kevin Brady, a Texas Republican who is chairman of the Joint Economic Committee, has marked the Fed’s centennial by calling for a commission “to examine the United States monetary policy” and “evaluate alternative monetary regimes.”

The trenchant question is whether nostalgia for “originalism” is a useful guide to policy. Wilson knew well that the Second Bank of the United States — a 19th-century precursor to the Fed — had been left to die, at the insistence of President Andrew Jackson. But Wilson was trying to govern for the present, not to placate his party’s ghosts. Congress today should receive reform proposals in the same spirit.

Roger Lowenstein is writing a history of the Federal Reserve.

 

Golf in China Is Younger Than Tiger Woods, but Growing Up Fast

Sim Chi Yin/VII Mentor Program, for The New York Times

For 8-year-old Xie Chengfeng, there is one goal in life: to be the next Tiger Woods. He has never been to school, and virtually every aspect of his daily life is geared to training.

By BROOK LARMER

Published: July 11, 2013 73 Comments

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Xie Chengfeng had a fever. Otherwise, the Chinese golfer would have been driving his orange coupe to the practice range on this June morning rather than languishing in bed, cold towel on his forehead, in his four-story mansion. Five years ago, Xie (pronounced “shee-eh”) and his family uprooted themselves and moved to Mission Hills, a sprawling golf resort in the southern Chinese city of Shenzhen for just one purpose: so he could become the next Tiger Woods.

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Tony Law/Redux, for The New York Times

Kuang Yang, 8, at the Mission Hills Golf Club in Shenzhen, China.

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Tony Law/Redux, for The New York Times

Cheng Hanyu, 7, during a lesson with C. K. Tan, with his mother, Yao Yu, close by.

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Tony Law/Redux, for The New York Times

Daniel Tang, 10, at Bayhood No. 9 in Beijing, who is among the top-ranked players in his age group nationally. At home, he has a 400-square-foot putting green, so he can practice at night and during the long winters.

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Nearly every day of the year, when he’s not competing in a tournament, Xie works out in the morning, using the punching bag, medicine balls and bull whip (to strengthen his wrists) in the second-floor living room overlooking a quiet lagoon. Then he’s off to the members-only driving range for two hours of training, hitting balls with every club in his bag. After lunch, Xie works on chipping and putting before playing a round on one of Mission Hills’ 22 courses (it bills itself as the world’s largest golf club). Nearly every other activity is designed to benefit Xie’s golf game: piano lessons to strengthen his fingers; math tutorials to help him calculate distances, wind speeds and green breaks; and a daily English class to prepare him for his eventual arrival on the PGA Tour.

Xie is 8 years old.

When I visited his family home last month, the boy’s father, Xie Xiaochun, handed me a plate of papayas grown on their back patio and an album of baby photos of his only child. One set of pictures showed the chubby toddler in a navy blue sweater vest, swinging a golf club. “He started hitting balls when he was 2½ years old — younger than Tiger was when he began!” Xie’s father told me in Mandarin. Barely six months after his son began playing golf, Xie Xiaochun — a 43-year-old migrant from northeastern China who made a fortune in the trucking-logistics business — bought this house, and the golf membership that came with it, so his son would have ready access to world-class courses and instruction.

You can’t call Xie a school dropout. He has never attended school. “He really didn’t want to go, and I thought it was a waste of time he could use for golf training,” his father said. As his peers went off to first grade, the outgoing boy enrolled in a succession of golf academies — first at Mission Hills at the Cindy Reid Golf Academy, named after an American teaching pro, then at one on Hainan Island run by Tiger Woods’s former coach, Hank Haney, and finally at a summer golf camp in Japan. Father and son are now back home, working on their own regimen. Xie’s parents still call him Xiao Bao, or Little Baby: at nearly 5-foot-3 (two inches shorter than his father) and 120 pounds, he dwarfs his 8-year-old competition. (Though his parents are small, their homeland in northeastern China is known for producing giants.) When asked to name his favorite club, Xie replied. “The driver, of course!” He can hit it nearly 220 yards, about as far as the average adult amateur — and about 50 yards past his peers.

Xie said his feverish symptoms began during a tournament the day before. I hadn’t noticed, because his sunburned face always looked flushed, especially above his all-pink golf ensemble. He ended up with a third-place trophy, but his mother whispered to me: “He often feels sick when he doesn’t play too well.” Despite the fever, when I asked about the car in the driveway, Xie shuffled downstairs to show me the full-size, Chinese-made electric car — a gift from his father for his 6th birthday. Plastered on the car’s back window was a “test driver” sticker; the logo on the side, because of an intentionally displaced “S,” read “Peedway.” “He’s big enough to drive,” his father said. “He’s just not allowed to leave Mission Hills.”

The People’s Republic might seem an unlikely incubator for golf prodigies. Chairman Mao, after all, banned the game in 1949 as so much bourgeois frippery and had the handful of golf courses that predated the Communist revolution plowed under. The taboo lasted 35 years. China’s first golf course built since then is not yet three decades old — younger than Tiger Woods. Even today, the state ostensibly outlaws the construction of new courses in mainland China, lest they gobble up too much scarce land and water — an edict that, though flouted in places, still limits the growth of the game. Then there’s the paucity of role models: though the country churns out Olympic champions in sports from diving to table tennis, China has just four professional golfers — two men, two women — ranked in the world’s top 300.

And yet Chinese wunderkinds are now beginning to infiltrate some of the highest levels of golf. First came 14-year-old Andy Zhang, who played in last year’s U.S. Open. Then, in April, Guan Tianlang, also 14, dazzled at the Masters. The boy in popsicle-colored pants — the youngest ever to tee off at the tournament — made the cut despite a rare slow-play penalty that angered his new fans (the rapper Lil Wayne tweeted: “Shame on the Masters”). With disarming maturity, the eighth-grader never scored worse than a bogey in four rounds and became the toast of the tournament. Gary Player said: “Mark my words: we are witnessing the most historic moment golf has experienced in my lifetime.”

And the prodigies keep getting younger. In May, Ye Wocheng — at 12 years old, not even a teenager — became the youngest golfer ever to compete in a European Tour event when he played in the China Open. (The record he broke was set the year before by none other than his Chinese rival, Guan.) Ye has been playing since he was 4 — two-thirds of his life — so he wasn’t kidding when he said, through his braces, “I’ve dreamed of this since I was a boy.”

These three boys may be just the beginning. Beyond them, training with ferocious intensity, is a small but growing band of younger Chinese golfers — some, like Xie, just 7 or 8 — who are starting to win international tournaments. We’ve come to expect such precociousness from China’s assembly line of Olympic gymnasts and female weight lifters — athletes plucked from relatively poor families at an early age and molded into champions by the Soviet-style state sports machine. But the case of the golf prodigies is more curious and complex, offering an unusual window into modern China.

The wealthy children of China’s economic boom — the fu er dai, or “second-generation rich” — are often derided as “little emperors,” so spoiled by privilege that they need never strive nor suffer. The reputation is, in many cases, richly deserved, and you would never confuse hitting golf balls off the Bermuda grass at Mission Hills with laboring in a steel mill or a garment factory. Even so, these boys and girls, whether driven by desire or family pressure, often train nonstop, with very few days off, under a parental discipline that can rival the toughest coaches in the Chinese sports system.

Obsessive parenting exists everywhere, of course. But in China, the sudden explosion of wealth and the preponderance of only children (because of the restrictive one-child policy still prevalent in many parts of the country) intensifies the anxiety of parents willing to go to almost any extreme to turn their child into the next Tiger Woods. Many foreign pros worry that children who are pushed to train so hard will burn out long before they reach their prime. Yet the tantalizing sight of a Chinese boy at the Masters has compelled some parents to push even harder. “Guan has inspired a lot of people,” says a foreign pro in Beijing. “But I now have parents of 13-year-olds asking me, ‘Does my son have the ability to play in the Masters?’ With that kind of attitude, you either quit or double down.”

In the effort to create a Chinese star, families are not the only ones doubling down. Corporations, too, are eager to find a figure — golf’s version of the basketball star Yao Ming — who can help build a sport that appeals to China’s status-conscious elites. And now, an even bigger player has invested in the quest: the Chinese state. With golf’s reinstatement into the Olympic Games, starting in 2016, the medal-hungry government is taking a keen interest in the game it once disdained.

The head of the state-run China Golf Association, Zhang Xiaoning, says that golf’s emphasis on technique and mental strength, rather than sheer athleticism, makes it “ideally suited” for Chinese. (China even claims that a stick-and-ball game played by the elites during the Song dynasty nearly a millennium ago is the actual precursor to golf.) The challenge now is to expand the pool of athletes in a game that is almost the exclusive preserve of the very rich. So far, the C.G.A. has teamed with corporations to host tournaments, teach golf in primary schools and build a sophisticated national golf training center. In March, China even signed up Greg Norman, a former world No. 1, to help develop a national team that could win Olympic medals. There’s little chance of that in 2016, but with Guan, Ye and the pack of prodigies on the horizon, the future of golf already seems to be tilting toward China.

Early one recent Saturday morning, a stream of luxury cars pulled into the parking lot at Bayhood No. 9, a golf club and the most popular training ground in Beijing. BMWs and Range Rovers, Porsches and a single silvery blue Rolls-Royce — each disgorged a child dressed in colorful golf attire. A lesson with the head pro in one of the club’s state-of-the-art plexiglass bays costs $250 an hour. The row of V.I.P. suites on the second floor — carpeted rooms with flat-screen televisions and two hitting mats — rent for $75,000 a year. When I inquired at the front desk, the attendant smiled. “The V.I.P. suites are fully booked until next year,” she said. “May I put your name on the waiting list?”

By 9 a.m., close to a dozen junior golfers were chipping and putting around the practice greens, a parent or pro hovering over each of them. A mother in sunglasses laid out 20 balls for a pudgy boy in electric blue pants, scolding him under her breath when he flubbed a chip, then squeezing his face with delight when he rolled one into the hole. Steps away, a chain-smoking man in an orange shirt that matched his orange-tinted hair stood over a bunker where his 11-year-old son blasted out one sand shot after another. “Wrists firm!” the father barked. “More loft!” he cried after another shot. How long did father and son plan to train that day? The man smiled: “We’ll be here until it’s too dark to see!”

China is producing some of the world’s best young golfers because wealthy families who have profited from the nation’s market reforms are replicating, in miniature, the formula of the socialist state sports system: pushing kids to specialize early and then having themchi ku, or “eat bitterness,” with relentless training. “Families are different in China,” says Chen Li, a golf father who accompanies his 10-year-old son through eight hours of training each weekend day. “In America, you offer kids a big plate with lots of choices, right? We give them a small plate — make them choose early — and stack it as high as possible.” He raised his hand higher and higher and then wobbled it. “The pressure can get pretty heavy.”

That same pressure exists across Chinese society as families coax their children to excel in piano, ballet, English or mathematics. Golf has landed on the menu of options only recently, as parents — many of whom do not play — are attracted to an outdoor family activity imbued with status, prestige and bright clothing. Thirty years ago, there were no golfers or golf courses in mainland China. Today there are around 400,000 regular golfers, a number that could easily double by 2020 as the middle class expands. The central government’s 2004 ban on course construction, meanwhile, has been subverted in some localities by a collusion of economic and political interests. As a result, the number of courses in China has grown to some 600 today from 170 in 2004, with 1,000 projected by 2020. (The U.S. has 15,000 courses, Japan 2,500.)

It is not simply a shortage of courses, competitions and coaching but the high prices for all of them that make junior golf a zone of exclusivity. Golf skews rich in other parts of the world too, but in the United States, juniors can gain cheap access to municipal courses and ranges. A network of local and national junior tournaments flows into high-school programs and university scholarships. None of this golf infrastructure, and the golf culture that accompanies it, exists in China. In the absence of a simple path forward, golf families are undertaking their own elaborate regimens for their promising sons or daughters.

Inside the Bayhood clubhouse, I watched Daniel Tang, a 10-year-old boy in canary yellow pants, take a lesson with C. K. Tan, a popular Malaysian teaching pro. Tang has played golf for six years, the past four with professional instruction. He now ranks near the top of his age group nationally. His swing is nearly flawless, but his father wants him to add distance to his 190-yard drives. Tan videotaped the boy hitting a sand-filled impact bag to analyze his body rotation, club angle and club-head speed at impact.

After the lesson, the boy took off his hat and shook my hand as politely as if we had just concluded a match on the 18th green. But he was hardly finished: he still had a few more hours of chipping and putting before an hour session with a golf-fitness trainer. (All the hard work would pay off. At a June tournament on the same mountain course near the Great Wall where he finished fifth a month earlier, Tang won his age division by three shots, shooting three over par for 27 holes.)

Watching Daniel Tang putt in the fading sunlight, I asked his father, Tang Hui, how his son had become so devoted to golf. “When he was 5 years old,” Tang Hui said, “I told him, ‘Listen, if you focus on golf, I will invest whatever it takes.’ ” His son, he said, “did not object.”

Since then, their family life has bent to the gravitational pull of their only child’s golf career. Moving into a house closer to a golf course, Tang Hui installed a 400-square-foot putting green on the third floor so his son could practice at night and through Beijing’s long winters. Every winter over school holiday, Tang and his mother travel south, to China’s golf mecca, for up to a month of full-time training with another elite golfer, a bubbly 10-year-old girl named Ni Jiaman. Even the decision last year to transfer Tang out of a rigorous public school and into Ni’s international school in Beijing hinged on golf: a lighter homework load and more flexible schedule give him more time to train. The daily English classes, meanwhile, are priming him for his first U.S. tournaments — and perhaps a scholarship to an American university.

The cost for this kind of pro training is steep. Even starting out, many golf families spend around $30,000 a year on lessons, greens fees and travel for tournaments and training. Expenses increase sharply when families start traveling to the United States for junior tournaments, enroll their children in full-time U.S. golf academies or hire a full-time foreign coach in China. At Bayhood No. 9, I asked the father of another junior if his investment in golf had been worth it. “Oh, I don’t look at this as an investment,” said the man, who often caddies for his son. “I see this as a chance to spend a lot of time with my son.” He raised an eyebrow. “If I weren’t doing this, I’d be spending all my time and money on my mistress.”

Just north of the crimson walls of Beijing’s Forbidden City, off a busy eight-lane boulevard, is the government-run Shichahai sports school, which is known as the cradle of champions. More than 600 athletes live there year-round. Since its founding in 1958, Beijing’s athletic training base has molded dozens of Olympic gold medalists in every sport from taekwondo to table tennis, gymnastics to badminton. The Chinese film star Jet Li even learned martial arts there.

One afternoon in June, in a basement at Shichahai, I watched a group of young golfers grimacing in pain as their coach led them through a series of calisthenics under a large red Chinese flag. This first cohort of golfers ever to live at Shichahai is evidence of China’s intent to develop golf as an Olympic sport. One of the most promising and youngest prospects is Luo Junyi, an 8-year-old girl with a button nose. Luo sometimes sees her parents on weekends, but she lives at Shichahai full time, abiding by the sports system’s rules of the “three togethers”: eating, sleeping and training with her fellow athletes.

The Shichahai coaches selected Luo because of her excellent tournament results — a boon because her family couldn’t keep up with the arms race of junior golf. When I first met Luo and her father in May, at a tournament where she finished second, she was playing a practice round with a 7-year-old boy, Eric Zhou, whose parents told me they spend $50,000 a year on his golf career. (Zhou, who won an international 6-and-under championship in Las Vegas last summer, went on to win this tournament, too, on the final hole; Luo finished second in her age group.) “We don’t have the same economic conditions as the others,” Luo’s father told me. “So when Shichahai offered my daughter a spot, we took it.” The Beijing school charges $350 a month for room, board, classes and golf training — a fraction of what other parents spend. If she makes the Beijing team, the tuition will be waived.

Spurred by the 2009 decision to bring golf back into the Olympics, the Chinese sports system is trying to make up for lost time. So far, the C.G.A. has built a three-tier system of pro, amateur and junior national teams, and — by making golf a medal sport in the National Games — compelling Chinese provinces to form their own teams. To expand the base of young golfers, the C.G.A. has worked with HSBC to host junior tournaments and to teach golf in primary schools, reaching tens of thousands of children. That is a tiny number in a country of more than 1.3 billion, and even the C.G.A.’s head of training, Li Dazheng, frets that the “assembly line” China has created for other sports does not yet exist for golf. Still, according to Michael Dickie, the Scotland-born head coach of China’s women’s Olympic team, “no other country in the world is putting as many resources into golf as China. It’s unparalleled.”

Luo is the only female golfer at Shichahai — and far more boys than girls show up at junior tournaments — but China’s sports system prides itself on developing male and female athletes with equal vigor. “We are focusing on women,” C.G.A.’s chief, Zhang Xiaoning, says, “because Chinese women have a greater chance of achieving breakthroughs on the international stage.” They already have: Feng Shanshan, 23, won last year’s L.P.G.A. Championship, a major, and is ranked No. 6 in the world. Two top teenage girls received golf scholarships to Duke and Georgetown. And while Feng is the lone Chinese woman in the top 100, many golf families look to South Korea for greater inspiration: Korean women now account for an astonishing 35 of the L.P.G.A.’s top 100.

The C.G.A.’s biggest gambit is an $80 million national golf training center inaugurated last year in Nanshan in Shandong Province, on China’s eastern coast. The facility, built to C.G.A. specifications by the Nanshan Group, a Chinese conglomerate, is meant to surpass the most advanced training centers in the West. Beyond the gimmicks — bunkers with four kinds of sand, colorful bushes shaped into the five Olympic rings — the center has several hundreds of thousands of dollars’ worth of the latest digital swing technology. So far, however, the machines are rarely used. A junior golf academy trains at the range, but the technology is reserved largely for the national teams, which convene there sporadically. “The equipment is like an X-ray machine,” says one coach. “You only need it once or twice per year.”

The city-level training facility at Shichahai, a converted boxing gym with seven artificial-turf golf mats and nets, has none of that sophistication. Five days a week, after taking morning classes, Luo and her teammates smash golf balls into nets; on weekends, they play on local courses. Their two Chinese coaches have little expertise: one is a young college graduate with a degree in golf-management studies, while the other is a former national taekwondo champion who, though fanatical about conditioning, confessed to me that he had never hit a golf ball before being assigned to the team last year. A foreign teaching pro comes once a month to give lessons, but it’s a different person each time. “We would like to have more consistent lessons with a foreign pro,” Luo’s father said. “But what option do we have?”

China’s junior-golf trailblazers, Guan Tianlang and Ye Wocheng, live two hours from each other in southern Guangdong Province. In some ways, Ye has been chasing his older rival from the moment he picked up his first golf club, by accident, at age 4. Left alone for a minute at a driving range, Ye tried to swing his father’s giant Callaway driver — and shattered it against a partition. “I was furious,” recalls his father, a construction-company boss. “That club cost me more than a thousand dollars.” The next day, he bought his son a set of small clubs and showed him a hitting net in a local golf shop. “Let him hit balls as long as he can,” he told the shop owner, “and give him a Coke only if he sweats.” Even at 4, Ye hit balls all afternoon until his face dripped with sweat.

The prizes for both boys would get only sweeter and more addictive. At 6, Guan was already winning trophies at local tournaments and preparing for his first competitions in the United States. His father and mother did not take him out of school, but they pulled back from their own businesses and invested all of their time — and part of their considerable wealth — into his career. Guan’s father was, and remains, his primary coach, but as the boy prepared for his first U.S. tournaments, he took lessons from Dan Webb, a Canadian teaching pro then based in Guangzhou. Guan had already been golfing for two years, Webb says, “and he could imitate the swings of four pros: Tiger, Furyk, Els, DiMarco.” The boy not only dressed like a pro, with primary-color pants hand-sewn by his mother, but he also had the preternatural calm of a tour veteran. “His real talent,” Webb says, “was his self-belief.”

Not all of China’s top juniors have perfect technique — indeed, Guan’s swing is considered flawed — but their mental strength and self-confidence set them apart. At the Masters, the 14-year-old Guan startled reporters when, in his soft voice, he pronounced: “I wish, one day, I can win all four majors in one year.” Nobody has won golf’s Grand Slam in a calendar year in the modern era, not even Woods. Guan’s statement was too innocent to be considered arrogant, but it did reflect the sky-is-the-limit ambitions of modern China.

Ye hasn’t lagged far behind Guan in achievements or self-confidence. He broke par when he was 8. By 9, he was winning most tournaments in his age group in China. But filling his family’s three-story house with junior trophies — more than 100 now line the bookshelves — was never the ultimate goal. Early on, watching a P.G.A. tournament on TV, Ye fixated on Woods — not because of his swing or personality but because he pulled off brilliant shots under pressure. “Even when I was 9,” Ye told me, “I was dreaming about being No. 1 in the world.”

Chinese families may be able to create perfect petri-dish conditions for incubating golf prodigies: discipline, focus, hard work, unwavering support. But creating a world-class golfer requires a deeper level of expertise than Ye’s local Chinese pro could offer. At a junior event in 2010, Ye and his father were introduced to David Watson, a veteran British touring pro who had become a sort of Pied Piper for top Chinese juniors. Standing 6-foot-5 and ramrod-straight, Watson fixed the 9-year-old with a hard look: “Are you willing to make a huge sacrifice to be the best?” Ye nodded. What started as a once-a-week lesson eventually became a full-time partnership (with Ye and another boy). And the results followed. Ye won the San Diego Junior Masters in 2010 and then repeated the feat in 2011. “You could see already,” Watson says, “that he was bred to play this game.”

The outside world noticed, too. When I followed Ye during the first round at the China Open in May, the 12-year-old — dressed in an orange and lavender Nike ensemble — had an extra member in his entourage. Besides Watson, who was carrying his bag, the gallery included his mother and father — and a young Nike representative. According to Ye’s father, Nike has been sending Ye a steady supply of free golf clothes and clubs since he was 9. (This is a common practice; signed endorsement deals would disqualify players from many junior and amateur events — not to mention American college teams.) Nike has also signed up Watson as part of its worldwide advisory staff, bringing him to the United States for workshops on fitness and training. If Ye ever does become a star, he will most likely be swathed in the swoosh.

And draped in China’s national flag. Ye has not only been selected for the national junior team, a squad that will prepare for the 2020 Olympics, but the state also pays part of Watson’s annual salary. So here, in a way, is a new Chinese model for creating a golf star: a convergence of political, commercial and family interests, all with different motives, serving a single goal — to turn a 12-year-old boy into the best golfer in the world.

In every industry that China has built from scratch over the past three decades — from cars to computers — the country has relied initially on a heavy injection of foreign expertise. In the auto industry, the transfer of technology came from engineers and designers; for golf, it comes from the foreign teaching pros (not to mention course designers) who have flocked to China.

Fifteen years ago there were few full-time foreign pros living in China. Today there are a few hundred, both Western and Asian, and they can command fees higher than they could get in the United States — between $100 and $250 an hour. One pro in Shenzhen charges $500 an hour and still has no shortage of students. Before a tournament in June, the parents of a 12-year-old girl flew her to Shenzhen for a series of 10 lessons with this pro — $5,000, plus travel costs — before flying to the tournament venue. (She still lost.)

Foreign pros in China often find themselves in the odd position of pleading with parents to slow down. “They get upset when I say one lesson every two weeks is enough,” says C. K. Tan, the pro at Bayhood No. 9. One of his colleagues puts it more bluntly: “Since Guan, everybody is chasing him down this path. And nobody really knows yet whether it will lead to glory — or the abyss.”

A few years ago, American golf academies seemed poised to flood the China market. But several famous ones that opened branches in China — run by golf luminaries like David Leadbetter and Cindy Reid — have closed, often after disagreements with local partners. It’s a pattern any foreigner doing business in China would recognize: Chinese firms tend to nudge out their foreign partners once the technology has been transferred and the local company has built up its own strength and know-how.

The Chinese academies still rely on foreign pros, though, because clients demand them. Dan Webb, for example, now runs a multistory driving range — “a golf factory,” he calls it — at the Sand River Golf Club in Shenzhen. Besides hiring 10 foreign pros, Webb is bringing in two Dutch psychologists to start a program focused on the mental aspects of the game, analyzing frontal-lobe activity as students hit. His idea, he says, is to “create a Shaolin temple for golf” where students train with the discipline of warrior monks. His Chinese boss has bigger ambitions: He wants Webb to open 50 golf academies in China over the next three years.

Being Guan’s childhood coach gives Webb extra cachet in China. Since Guan’s success at the Masters, other golf parents have been trying to follow his formula — lessons with a foreign pro, early exposure to international competition and extended stays in America to train and compete. One ripple effect: in the past few months, at least a dozen top Chinese juniors have enrolled in full-time residential golf academies in the United States, some with annual costs above $60,000. And the aspirants keep getting more precocious. In Beijing, I met a 4-year-old boy, Zhu He, whose parents took him to Florida and California in June to check out three prospective golf academies. “Once he’s 5,” his father said, “he’ll be ready to go.”

Plenty of children seem to be thriving in this competitive atmosphere. On a practice green in Shenzhen, I met Kuang Yang, an 8-year-old who was dressed like a miniature pro in bright orange pants and saddle shoes. He was goading a friend: “Bet you can’t make that.” Kuang won a tournament by 11 strokes the week before — shooting an astonishing five-under-par 67 in one round — and he likes challenging everyone he meets, even adults. After his friend missed, Kuang curled a long putt into the hole. His parents cheered, and their son looked over, smiling fiendishly. “He loves to win,” his father said, “because it brings him a lot of praise.”

But then there is the case of Liu Yanwei, a top Chinese amateur I visited in Shenzhen. His father pulled him out of school in Beijing two years ago, at age 13, and sent him 1,300 miles south to live in a hotel suite in Mission Hills — not to enroll him in a golf academy but essentially to build one around him. Along with an Australian teaching pro who flies in 10 days every month, his father — a wealthy industrialist — hired a young American pro to practice with his son; a full-time fitness trainer to give him two-a-day workouts; and two employees to serve as the boy’s ever-present minders, because his parents still live in Beijing. On the practice green before a round, I asked Liu if his father ever gave him a day off. “Nope,” he said, flashing a grin. “Only work.” Over the one holiday even factory workers take off — Chinese New Year — Liu’s father visits for two weeks, evaluating his son’s progress. Instead of vacation time, Liu said, “that is my jail time.”

Golf has had its share of prodigies who have failed to realize their early promise, like the young American Michelle Wie. Burnout and injury are dangers for any athlete who trains unrelentingly from an early age, especially if they are trying to live their parents’ dream. “It’s not easy when kids are extrinsically motivated by a parent,” says Tom Jackson, president of the Core Golf Academy in Orlando, Fla., which has 51 students from all over the world, including China. “They’ll reach a point where they say: ‘I don’t want this. This was always your dream, not mine.’ ”

Xie Chengfeng couldn’t stop laughing. It was the first evening of a junior tournament in the southern Chinese enclave of Nansha — Xie’s sixth competition in barely a month — and the boy was racing down the clubhouse stairs with a raucous posse of 8-year-olds. The tournament sponsors, the Florida-based Core Golf Academy, had just held a buffet dinner for all 85 contestants. Parents were expressly not invited. In the joyous mayhem, I realized one reason Xie loved tournaments so much: They offered rare moments like these in which he could truly play with other kids. At home, following his solitary regimen, away from school, Xie led an isolated existence. This was a welcome release.

The next morning, it was back to business. At 6:45, dressed in his all-pink ensemble, Xie was hitting balls on the driving range with his father close behind him. Long rows of juniors and their parents flanked them on either side. None of the kids were talking or laughing anymore. At the far end of the range, in checkered pants and an orange Nike shirt, the tournament’s marquee player, Ye Wocheng, rifled drives into the morning air. Ye’s coach, David Watson, softly repeated swing pointers, while his parents watched silently. This tournament, which the Core Academy put together as a way of recruiting Chinese students, would serve as a tuneup for Ye before a series of international junior tournaments in the U.S. But his father, like Xie’s, was also curious about Core, which boasts one of Tiger Woods’s coaches, Sean Foley.

It has been a heady time for Ye. Since his debut in the China Open, he has received queries from two PGA Tour caddies looking to be hired, one sports agent and two European tour events. (He has declined their approaches.) In late May, I sat with the 12-year-old in a clubhouse bar watching the Golf Channel, when suddenly his own face appeared on the television in a special broadcast about his experiences. Ye kept staring at the monitor, his mouth half-open in a disbelieving smile. “It’s a weird feeling,” he said.

In the past couple of months Ye has won three junior tournaments in a row by coming from behind with late charges, building a reputation as a closer. Watson now has another goal for him: to win every junior tournament by at least 10 strokes. At the two-day Core event, Ye was tied for the lead after the first day with a 15-year-old boy, Xue Han, who trains full time at a small academy in Florida, where 11 of the 15 students are Chinese. On the final day, Ye pulled away, posting birdies on the final three holes to finish with a four-under-par 68. He won by eight strokes. “Still two shots off,” Watson told him, only half-joking.

Ye’s father understands the need to pace his son for the long haul. “The road from juniors to pros is a marathon, not a sprint,” he told me. Even so, don’t expect Ye to take any days off soon. His goal now, it seems, is to break every record Guan has set. Becoming the youngest golfer ever to play in a tour event was one milestone. Winning more international junior championships is another. His next big target: Augusta. To qualify for the Masters, Ye would need to win this fall’s Asia-Pacific Amateur, as Guan did last year. It will be a rare opportunity to go head to head against Guan, even if his older rival, coming off five PGA Tour events in the United States, would still be considered the heavy favorite.

Out on the golf course, I spotted Xie on the sixth fairway. He was hard to miss: a large boy in pink, a full head taller than his playing partners, moaning loudly after an approach shot had gone astray. Coming off the green, Xie screwed up his face and shook his head: “Oh, I’m playing very badly.” He finished in third place, and his father gently consoled him afterward.

When I spoke to Xie’s father, he seemed in a reflective mood. “My thinking has changed a lot since we started,” he said, as his son played a game on his iPad. “Kids who start early have an advantage in golf, but it’s a long road to the top,” he said. “I don’t want to push him too hard. I want to make sure he keeps doing this because it’s fun and he’s interested, not just because I’d

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