Investors are chomping at the bit to get a piece of China at any cost. As always, you have people on both sides of the argument. One one side, you have the pessimists like noted short seller Jim Chanos arguing that China's rapid rise is doomed for a painful burst. On the other side are those who look at China's population as a sign that growth is here to stay, at least for now.

IN PICTURES: The 5 Steps Of A Bubble

Strong Appetites
This week included two Chinese IPOs that were met with a frenzy to rival the 1999 internet bubble. The first is Youku.com (NYSE:YOKU), aptly described as China's answer to YouTube, which had a breakout IPO day. Priced at $12.80 a share, the stock is was up by nearly 170% to $33.44 by the end of the day. The second IPO was e-commerce site DangDang (NYSE:DANG), which many describe as the Chinese version of online retailing giant Amazon.com (Nasdaq:AMZN). Excited investors lifted shares of DangDang by nearly 90% on its debut day.

The initial success of these IPOs is primarily due to the great optimism surrounding anything online in China. With a population of 1.3 billion - almost five times that of the U.S. - China provides a huge market opportunity. If 50% of China's population gets online, you are talking about a marketplace more than twice the size of the entire U.S. population. It's no surprise then that these IPOs were met with tremendous fanfare. How they will perform afterward, however, is a different story. For now, investors' appetite for China and the internet is strong.

Going Gaga
Not all Chinese IPOs have been smashing successes. A few weeks ago, Le Gaga Holdings (Nasdaq:GAGA), a Chinese-based grower of vegetables, enjoyed a nice IPO share pop, only to come back down the next day. Shares are trading below $9, down nearly 30% from the IPO high of $11.39 just a few weeks ago. Plus, at the current price, shares are trading at 23 times earnings, hardly an attention grabber for bargain hunters. Cleary, not all companies are benefiting equally from the euphoria over China.

The Bottom Line
Whether China is in bubble territory or not, investor excitement is clearly a reason to be very cautious. Everyone looking for growth outside the U.S. is piling into emerging and developing markets and China is topping the list. Ten years from now, it's likely that China's standard of living and economy will be significantly larger than it is today. But that progress will likely encounter bumps along the way. Optimistic investors today should consider themselves warned. (To learn more, see Riding The Market Bubble: Don't Try This At Home.)

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