The first five chapters form a preface for the rest of the novel and also serve as a general introduction for the reader. The author makes the purpose and main theme of the novel clear by criticizing the writers of the "beauty-and-talented-scholar" school of writing, as well as the writers of the "breeze-and-moonlight" school of writing, who, he says, corrupt young people with pornography and filth. In contrast to these types of novels, Tsao Hsueh-chin offers his literary principle of writing according to facts that are true and reflect reality. This emphasis on realistic writing is of profound significance because during the era of the Ching Dynasty (1644-1911), anti-realism was predominately the fashion.
For the most part, Chapter 1 focuses on Chen Shih-yin's decline and Chia Yu-tsun's currying favor with persons in authority for personal gain. The author describes, in outline, the social contours of the declining feudal society by comparing these two characters.
Chen Shih-yin, a well-to-do scholar, lives happily with his wife, Lady Feng (Feng-shih), and their three-year-old daughter Ying-lien (Lotus) beside the Temple of the Gourd in the city of Kusu (today: Soochow). In a dream, Shihyin meets two immortals (a monk and a Taoist), who show him a beautiful piece of jade, the Precious Jade of Spiritual Understanding. The dream ends, but later, the monk and the Taoist reappear and predict a sad fate for Shihyin's daughter, Lotus.
Later, Shih-yin meets his poor scholar-neighbor, Chia Yu-tsun, in the Temple of the Gourd. Yu-tsun works as a scrivener — that is, he sells scrolls and inscriptions to make a living. While talking with Shih-yin, Yu-tsun is greatly attracted to one of Shih-yin's maids, Chiao-hsin (Apricot); she seems to return his admiring glances.
During the Mid-Autumn Festival, Shih-yin and Yu-tsun spend the evening drinking wine and discussing poetry, and afterward, with Shih-yin's financial help, Yu-tsun leaves for the capital to seek fame and fortune. Shortly thereafter, a series of misfortunes befall Shih-yin: Lotus suddenly disappears during the Festival of Lanterns; Shih-yin falls ill; his house is burned to ashes when fire destroys the Temple of the Gourd; he is forced to make a meager living on his father-in-law's farm, and his father-in-law retains and mismanages the little money which Shih-yin has. Finally, penniless, aging rapidly, and in bad health, Shih-yin leaves with a lame and eccentric Taoist, setting out for faraway places.
Some time later, the author tells us, the new prefect of the city arrives. We will learn that it is Yu-tsun. Through the names of the two main characters in Chapter 1 — Shih-yin and Yu-tsun — the author reveals his symbolic creativity. Chen Shih-yin means "to keep the true facts hidden," while Chia Yu-tsun means "to clothe fiction in rustic language." This contrast serves to condemn and expose the dark, corrupt nature of the aristocratic ruling classes and the feudal system, although Tsao Hsueh-chin declares openly in this chapter that "the novel was clearly not written to pass censure on the time, nor touch at all on current events."
In Chapter 2, we see that the new prefect, Yu-tsun, is eager to express his gratitude to Chen Shih-yin for the loan of silver which made it possible for him to go to the capital and become successful. Learning, however, that Shih-yin left home to become a priest, he sends some silk to Shih-yin's wife and two parcels of silver to her father, Feng Su. Then, with Mrs. Chen's permission, the widower Yu-tsun marries Chaio-hsin (Apricot), the maid to whom he earlier took a fancy.
The author now tells us that Yu-tsun's term as prefect was not successful. Because of Yu-tsun's insolence and arrogance to his superiors, the Emperor dismissed him after less than two years.
Not one to worry unduly, Yu-tsun sends his household back to his native place, and he sets out to see "the famous sights of the Empire." During his travels, he spends time in Yangchow, where he tutors Lin Ju-hai's only daughter, five-year-old Lin Tai-yu (Black Jade), in order to make a living. Unfortunately, Tai-yu's mother (Madame Chia) unexpectedly falls ill and dies; then Tai-yu becomes ill, and her lessons are interrupted.
One day, during his free time, Yu-tsun strolls into a village tavern, where he happens to meet Leng Tzuhsing, a curio-dealer, who tells him about a recent development in the Chia family of the Jung Mansion. He emphasizes that the Chia family's prosperity is only superficial; their purses are nearly empty. Leng Tzu-hsing gives Yu-tsun a thorough briefing about the Chia family, seemingly mentioning all the family members and their relatives. In particular, though, he focuses on Chia Pao-yu, who was born with a piece of clear, brilliantly colored jade in his mouth. The boy is unusual and says many strange things for a child — such as, "Girls are made of water, men of mud" and "I feel clean and refreshed when I am with girls, but find men dirty and stinking."
Leng Tzu-hsing's panoramic overview of the Chia family provides us with a bird's-eye view of the entire Chia family and lays the groundwork for further development of later episodes. The author's emphasis in this chapter is on the Chin family's impending financial ruin. Outwardly grand and wealthy, they seem rich, but their money is almost gone. Furthermore, each new generation of this noble clan will be inferior to the last. These changes indicate the inevitability of the Chia family's decline and deterioration.
Beginning with Chapter 3, the main characters of the novel make their appearances, one after another. In a letter, Tai-yu's father recommends Chia Yu-tsun to Chia Cheng, a brother-in-law who is well-disposed to scholars, and, in turn, Chia Cheng presents a petition to the throne, requesting a position for Yu-tsun. In less than two months, Tu-tsun is appointed prefect of Yingtien (Nanking).
Returning to the time when Yu-tsun first arrived to greet Chin Cheng, we see that earlier he (Yu-tsun) agreed to escort Lin Ju-hai's lovely but delicate daughter, Tai-yu (Black Jade), to the Chin family to be taken care of by her grandmother, Madame Shih Lady Dowager).
When Tai-yu (Black Jade) arrives at the Jung Mansion, she is warmly welcomed by the entire family; however, she decides to watch her step in her new home and to be on guard every moment so that she won't be laughed at for foolish blunders. Without a doubt, Tai-yu is tremendously impressed by the aristocratic Chin family's extravagant way of living (compared with her own background). Here, in her new home, she has a chance to penetrate the hierarchical rites and formalities of a noble family.
After her arrival at the Jung Mansion, Tai-yu is introduced by her grandmother to many members of the Chin family, including two aunts — Lady Hsing and Lady Wang — and to three cousins — Ying-chun (Welcome Spring), Tanchun (Quest Spring), and Hsi-chun (Compassion Spring) — and to a most powerful, clever, and influential person, Wang Hsi-feng (Phoenix), who is the wife of Chin Lien and Tai-yu's sister-in-law.
Interestingly enough, when Madame Wang's son, Chin Pao-yu, is introduced by Lady Dowager to Tai-yu, both Pao-yu and Tai-yu have the feeling that they are old friends, that they are meeting each other again after a long separation. The author describes their meeting and their intimate eye contact in such a careful and romantic way that we are prepared for their relationship to develop into a soul affinity in later chapters.
In Chapter 4, the author tells us that one of the local gentry, Feng Yuan, was beaten to death by the servants of Hsueh Pan (the only son of Tai-yu's Aunt Hsueh, who is Lady Wang's sister). Feng Yuan tried to steal a kidnapped girl, Ying-lien, and Hsueh Pan finally gained legal rights to her. (Coincidentally, this girl is Lotus, Shih-yin's daughter, who was kidnapped several years ago.)
The murder case is brought to the court of Yu-tsun, the new prefect. According to law, Hsueh Pan and his servants should be punished for the murder of Feng Yuan — but because the Hsueh family is on an official "protected list" of the province, Yu-tsun listens to his attendant's advice and changes his mind about the verdict. He realizes that he must curry favor with the Hsueh family if he wants to secure his position. Therefore, Yu-tsun decides to let Hsueh Pan go free — provided that the Hsuehs pay a thousand taels for Feng Yuan's funeral expenses.
This scene clearly illustrates the fact that the Chin, Shih, Wang, and Hsueh families are all very powerful and influential in the province, and that the officials work hand-in-glove with the wealthy, aristocratic families in order to protect their own interests and ensure their own promotions. Because of the protection of the local officials, the aristocratic family members can do whatever they please — even violate the law. The corruption of the officials here, as well as the corruption of the feudal aristocratic families, represents the dark side and the decadence of the feudal system.
Later, Lady Hsueh and her son Hsueh Pan decide to escort his sister Hsueh Pao-chai (Precious Virtue) to the capital, hoping that she will be chosen as a companion for the princesses in their studies. Meantime, Lady Wang is overjoyed to learn that the charges against her nephew (Hsueh Pan) have been dropped. Almost simultaneously, she learns that her sister (Lady Hsueh), Hsueh Pan, and Pao-chai have just arrived at the gate.
Lady Wang embraces her sister, offers them hospitality, and is clearly eager for the family to be "closer together." This "closer together" notion will prove to be interesting. The arrival of Pao-chai, a beautiful and dainty girl of great natural refinement, will lead to many complications and entangling love relationships among Pao-yu, Tai-yu, and Pao-chai in later chapters.
In Chapter 5, the author devotes a good deal of time to describing one of Pao-yu's dreams: Pao-yu was led by the Goddess of Disenchantment to the Illusory Land of Great Void, where he was shown a record and destiny of the twelve foremost beauties in Pao-yu's province (Chinling). The Goddess also initiated Pao-yu into the secrets of sex so intimately and successfully that, in a dream, he made love to a fantasy of Ko-ching (his niece) while sleeping on her bed.
Tsao Hsueh-chin employs the romantic technique of using artistic expression to describe the numerous supernatural characters and events in order to create a mysterious atmosphere. This technique gives a certain fatalistic coloring to the story, but it is an integral part of the artistic structure of the book.
Through the description of the First Register of the Twelve Beauties of Chinling, and the Second and Third Registers of the Twelve Beauties of Chinling, the author anticipates the unfortunate fate of the twelve girls who live in the Jung Mansion, as well as the tragic ending of the novel. These registers and the songs (especially the series called "The Dream of the Red Chamber") are an artistic prelude to the actual, historical facts concerning the decline of these four large, influential families.