Almost every day there is news of a novel set in China, either a new publication or a re-discovery. Although such titles are not 'Chinese literature in translation', they do throw some light on that question of 'what do readers like?' Here's the latest (it was written in the 80s)...
Barry Hughart's Bridge of Birds: A Novel of an Ancient China That Never Was (The Chronicles of Master Li and Number Ten Ox)
As reviewed by Zackery Arbela, 3 April 2012:
Barry Hughart is one of the great hidden treasures of the fantasy genre. Many authors have been called ahead of their time, but in this case it;s an appellation that actually sticks, which explains why his Master Li stories were criminally under-appreciated when they first came out. Bridge of Birds is the first of three highly entertaining books.
The setting is China at the start of the T'ang dynasty, though the story plays fast and loos with historical details and is better described as a “China that never was.” Number Ten Ox is is a peasant whose village is suddenly afflicted by a curse that renders the children comatose. Seeking help, he travels to Peking, where he meets with Li Kao, an octogenarian criminal mastermind turned Imperial mandarin turned private detective and unrepentant alcoholic. Together they embark on a madcap adventure that takes them across this fantastical version of the Middle Kingdom, facing a pungent mix of ancient villages and memorable lowlifes.
The draws deeply upon Chinese folklore, mingled with a healthy dose of hard boiled detective fiction and generous helpings of broad comedy. At the time it was published, back in the dark ages of the 1980's, fantasy was still very much in its Dungeons and Dragons phase and no knew what to make of it, or the subsequent two novels that followed (The Story of the Stone, Eight Skilled Gentlemen.) There was nothing like it at the time and indeed there still isn't to this day – Asian-themed fantasy/detective novels are distinctly rare on the ground. The authors frustration with the publishing industry meant an to the series after the third book, which is a crying shame by any measure. If you looking for a rollicking fantasy read that is different from anything else out there, this is a good place to start.