OK, so is China really communist? Not from what I can see.

Just look at the IPO market. Yes, it's been sizzling.

And, of course, the latest mega deal is the public offering of Alibaba.com, which operates a sprawling group of fast-growing Internet properties.

According to a report from Bloomberg.com, the IPO surged from HK$13.50 to HK$39.50. In fact, Alibaba.com sports a market cap of a cool $25.7 billion. That is a thrill for Yahoo! (NASDAQ: YHOO), which has a 39% stake in the company.

Actually, Alibaba.com even has earnings. Although, at the current valuation, they are more than 150 times the market cap. That makes Google (NASDAQ: GOOG) look pretty cheap.

While China certainly has strong growth prospects, there are still risks. Can the country continue its torrid growth rate? What about political instability?

If you look at the history of US markets, strong IPO markets are usually a sign of excess and a top. So, investors should show caution.

And if you want to check out the IPO action here in the US -- which is not as frothy -- you can visit DealProfiles.com.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

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.

Sina (NASDAQ: SINA) reported results last night, showing revenue up 11% at $59 million. Operating income was under $13 million. The company has a market cap of $2.3 billion.

Baidu (NASDAQ: BIDU) and Sohu (NASDAQ: SOHU) both reported results last month. Revenue gains were fine, but the base is still tiny. Baidu, the largest search engine in China, had a profit of only $19 million. But, it sports a market cap of $6.6 billion. It trades at 42 times revenue, compared to Google at less than 12x.

Therein lies the mystery. China has over 130 million web users, putting it second only to the U.S. But the revenue generated from its major web portals remains remarkably small.

The issue also points to whether valuations for these companies are much, much too high. It will take them a long time to become as big as Yahoo! (NASDAQ: YHOO) which has a market cap of $30 billion.

Douglas A. McIntyre is a partner at 24/7 Wall St.

"There are still many years of spectacular growth ahead for China, which should culminate with the Olympics," notes Charles Payne, editor of the top-tier Wall Street Strategies newsletter. Payne is also well known from his weekly appearances on FOX TV's Bulls & Bears and FOX and Friends.

And while he cautions, "You definitely want to be out of that market when the trumpet begins playing the Olympic theme," he currently highlights select opportunities, such as his latest recommendation, NetEase.com (NASDAQ: NTES).

The company -- headquartered in Beijin -- was founded in 1997. Payne notes, "Netease operates an interactive online and wireless community in China, providing Chinese language content and services through its online games, wireless value-added services, and Internet portals."

The firm's online games business, he notes, focuses on massively multiplayer online role-playing games. In order to participate in these online games, users purchase prepaid point cards which he notes are are sold in China through wholesalers, Internet cafes, software stores, supermarkets, bookstores, newspaper stands, and convenience stores.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

CDC Corp. (NASDAQ: CHINA) is a favorite speculative idea for 2007 from momentum trading expert, Kevin Kennedy. The editor of The Coolcat Report notes, "CDC operates companies focused on enterprise software applications and services, mobile applications, online games, and the Chinese portal China.com.

"The company's software solutions are used by more than 5,000 customers worldwide within the manufacturing, financial services, health care, home building, real estate, and wholesale and retail distribution industries.

"Its China.com unit is a leading Mobile Value Added Services (MVAS) provider and Internet services company operating principally in China. CDC Mobile is focused on providing MVAS products to subscribers in China. CDC Games Limited is one of the market leaders of online and mobile games in China with more than 37 million registered users.

"CDC reported blowout third-quarter results in November. Total revenue was $78.2 million, an increase of 26%. Earnings per share tripled to $0.09 per share. Future plans include an initial public offering of either CDC Software or CDC Games and a continued emphasis on acquisitions. The stock is on a five-month win streak, including a 41% surge in November."