The IPO of Alibaba, the large Chinese e-commerce site, may show that the China stock markets are topping. The company appears to have raised $1.5 billion for about 17% of the company. This is good news for Yahoo! Inc. (NASDAQ: YHOO), which invested a billion dollars in the site, but it could also make the US portal look bad. If the China market moves down before Yahoo! can off-load some of those shares, its initial investment in the company may not look like a coup.

The astonishing thing about the Alibaba IPO is that, according to The New York Times, "the I.P.O. price translates to a multiple of 55 times its forecast 2008 earnings." The number serves to point out the fact that, even with its economy growing at 10% a year, sustaining P/Es at this level will become impossible, as it did in the Japanese markets and US internet stocks in late 1990s. Both of those bubbles led to corrections of more than 50%.

The Shanghai Composite Index is now up well over 200% this year. The bull argument for an ongoing increase is that the emerging China middle class needs a place to invest its money and cannot move that capital into overseas equities. That makes the market overly dependent on one set of buyers.

Warren Buffett recently warned that he could not find any stock values in China. He is more often right than wrong. But the telling evidence of a market that cannot be sustained is when its leaders reach dizzying heights. Shares in Baidu.com (NASDAQ: BIDU) one of the most visible Chinese companies, trades at 76 times its annual sales. The closest comparable company in the US, Google Inc. (NASDAQ: GOOG) trades at 14 times.

Does anyone really think that the disparity can be sustained?

Douglas A. McIntyre is an editor at 247wallst.com.