For many investors, investing in individual Chinese stocks offers them more choices and flexibility. However, it is also the riskiest approach to investing in China markets.

In order to profit from buying Chinese stocks, it is essential to gain general understanding about backgrounds of current China leaders who are in control of economic and social policies. The volatility in the US markets will have little impact on Chinese companies that focus on China's emerging middle class whose personal fortune will not be affected by downturns in the stock market or mortgage mess.

Chinese stocks are often classified into three categories:

• A shares: companies incorporated in mainland China and are traded in the mainland A-share markets. The prices of A shares are quoted in Renminbi, and currently only mainlanders and selected foreign institutional investors are allowed to trade A shares.
• B shares: companies incorporated in mainland China and are traded in the mainland B-share markets (Shanghai and Shenzhen). B shares are quoted in foreign currencies.
• H shares: companies incorporated in mainland China and are listed on the Hong Kong Stock Exchange and other foreign stock exchanges.

Because the original intention of setting up a stock market in China is to save the near bankrupted state owned enterprises, it is not surprised that savvy investors normally cannot find enough qualified companies to invest in China's domestic A-share or B-share markets. In Hong Kong, H-shares present higher quality companies. However, the very best Chinese companies, especially those private, investor friendly companies, are yet to be listed domestically or abroad. This presents a difficult dilemma for investors in Chinese stocks.