There's enough entertaining reading on China to fill a library, so here are just a few pointers to get you started:
Readable modern novelists easily purchased in translation at home include Ha Jin, whose stories tend to be remarkably inconclusive and so all the more true to life, derived from his experiences living in the northeast. Ocean of Words (Vintage, 2000), Waiting (Vintage, 2001), and the collection of short stories The Bridegroom (Vintage, 2001), lift the lids on many things not obvious to the casual visitor. Soul Mountain (Harper Collins, 2000), by Gao Xingjian, China's first winner of the Nobel Prize for Literature (although the Chinese populace is kept in ignorance of this), is the tale of a man who embarks on a journey through the wilds of Sichuan and Yunnan in search of his own elusive ling shan (soul mountain). The Republic of Wine (Arcade, 2001), Mo Yan's graphic satire about a doomed detective investigating a case of gourmand-officials eating human baby tenderloin, is at once entertaining and disturbing. His Garlic Ballads (Viking, 1995) is an unsettling epic of family conflict, doomed love, and government corruption in a small town dependent on the garlic market.
First-class travel books include Peter Fleming's News from Tartary (Northwestern University Press, 1999), originally published in 1936, and still the best travel book ever written about China. Fleming's perceptive account of a hazardous expedition along the southern Silk Route, from Beijing to northern India, is a masterpiece of dry wit.
For good general background reading, there are a few authors and publishers who turn out so much excellent and readable work that you should start by having a look at what they've done recently. Jonathan Spence writes the most readable histories of China, not just the weighty Search for Modern China (W.W. Norton, 2001), but gripping and very personal histories such as The Memory Palace of Matteo Ricci (Viking, 1994) on the clever self-marketing of the first Jesuit to be allowed to reside in Beijing, God's Chinese Son (W.W. Norton, 1997) on the leader of the Taiping Rebellion who thought he was the younger brother of Jesus Christ, and The Question of Hu (Vintage, 1989) on the misfortunes of an early Chinese visitor to Europe.
Dover Publications (http://store.doverpublications.com) reprints handy guides to Chinese history and culture, as well as oddities such as Robert Van Gulik's versions of 18th-century Chinese detective stories featuring a Tang dynasty detective-judge, such as The Haunted Monastery and the Chinese Maze Murders (1977). Dover's two-volume reprint of the 1903 edition of The Travels of Marco Polo (1993) is the only edition to have -- more than half is footnotes from famous explorers and geographers trying to make sense of Polo's route, corroborating his observations or puzzling why he goes so astray, and providing fascinating trivia about China far more interesting than the original account.
For more recent China watching, anything by the Italian diplomat Tizanio Terzani is a good place to start, but Behind the Forbidden Door is particularly compelling. While many books do their best to present the country in a favorable light, Nicholas D. Kristof and Sheryl Wudunn present a very realistic picture in China Wakes. Perhaps the most recent author to address the subject realistically is Gordon C. Chang in The Coming Collapse of China.
These next two recommendations barely mention China, but explain the problems that the country faces more clearly than any other recent writer. The Breakdown of Nations (Chelsea Green Publishing, 2001), by Leopold Kohr, examines why the largest nations always face the largest problems. Small Is Beautiful, by E. F. Schumacher, focuses on the problems a nation faces when it tries to move from an agrarian to an industrial economy; this book is out of print, but you can probably find a copy online. Truly enlightening books to have with you as you travel around the world's most populous nation.