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.