For now, Simon thinks the central government 's policies won't choke growth, and he's encouraged by increased spending in the rural areas aimed at creating jobs and distributing income more evenly throughout the country. "Investment is strong with the government's spending on infrastructure and from the private sector," he says. "Investment return is far above funding cost, and the liquidity is plentiful with strong company earnings."

Simon says the Dreyfus Premier Greater China fund is more focused on domestic spending drivers than on China's export side. That includes infrastructure sectors such as railways, subways, airlines and airports and highways. It also includes telecommunications infrastructure such as wireless and broadband. And he says the country's vast pollution problem will benefit companies selling pollution control equipment.

"These are the macro, longer-term trends," says Simon. "We're not encouraging investors to play the short-term liquidity in China. We're encouraging investors to take a ten-year view."

On the consumer side, job creation means more personal spending. People are buying property, and the private property development sector is taking shape. The consumer credit and mortgage businesses are growing, and people are spending more money on cars, jewelry and travel. "What we're looking at is where the next move is," says Simon. "What else will people spend on?"

The Dreyfus fund's three-year annualized return is 46%. One of its top holdings is China Travel, a Hong Kong-listed tourism services company that owns hotels in China and whose travel and online booking Web site, Mango City, is already China's third largest after just one year in operation, says Simon.

Another top holding is Bengang Steel, which will see increased orders from the government's plans to boost railway and building construction. Simon believes its possible merger with China's top steelmaker, Angang Steel, will enhance its value.

Valuation Concerns
At the Matthews China fund, co-manager Richard Gao and his team have trimmed back high-flying positions in the financial and property sectors and are building positions in industries such as utilities, infrastructure and telecom that he says have relatively cheaper valuations. "Our goal is to find good growth companies," says Gao, "but in recent months the valuations are getting more expensive. The valuations have to be justified by the growth prospects."

The fund, which has three-year annualized returns of nearly 40%, traditionally has focused on small-cap and mid-cap stocks. But the appreciation of some existing holdings has turned enough mid-caps into large caps that the latter now constitute more than 70% of the portfolio. "Mid-caps comprised more than 50% a couple of years ago," says Gao.

Chinese stocks tend to be volatile, and Gao says he expects to see even more going forward because he thinks that Chinese stocks listed on Hong Kong's Hang Seng  exchange--the market of choice for many foreign investors who play Chinese equities, and which generally sports lower valuations than China's domestic exchanges--are at peak levels.

The run-up in Chinese stocks makes valuations a foremost concern among many investors, but the variegated Chinese market has several different components with their own particular risks and valuations. This multi-tiered structure offers investors several different avenues when seeking to participate in the boom. Shanghai-listed Chinese "A" shares have been in the news this year with their stunning rise and spectacular tumbles. The A-share market is open mainly to domestic investors only, save for a very limited number of approved qualified foreign institutional investors. The market is a frothy, highly speculative venue dominated by retail investors.