I guess it really is that bad.

Even the hot Chinese economy -- the one that's been growing at a 10% annualized clip for several years now -- can cool off long enough to commiserate with the struggles elsewhere. The world's most populous nation joined the world in yesterday's orchestrated rate cuts, delivering on a 27 basis-points cut.

It's a bolder move than you think. China is battling inflation, which is now clocking in at a 12-year high. Since its economy is holding up considerably better than the rest of the world, slashing rates to spur growth isn't likely to keep inflation in check.

The commitment to help stabilize the global markets is commendable. The pro-growth stance is excitable.

Yes, folks. It's time to start nibbling on Chinese equities again.

It's been a long way down
It's been bad -- really bad -- for investors in Chinese growth stocks lately. Let's go over how far some of its biggest consumer-facing darlings have fallen.

 

10/8/08

52-week High

Change

Baidu.com (NASDAQ:BIDU)

$213.31

$429.19

(50.3%)

Sohu.com (NASDAQ:SOHU)

 $50.35

$91.50

(45.0%)

Ctrip.com (NASDAQ:CTRP)

$39.50

$70.89

(44.3%)

Home Inns & Hotels (NASDAQ:HMIN)

$12.58

$50.08

(74.9%)

China Finance Online (NASDAQ:JRJC)

$9.86

$42.00

(76.5%)

NetEase (NASDAQ:NTES)

$19.88

$27.16

(26.8%)

SINA (NASDAQ:SINA)

$32.51

$59.27

(45.1%)

It's the prices -- and not the fundamentals -- that have changed. Baidu remains the country's top dog in search. The latest survey by market research firm China IntelliConsulting Corporation shows that Baidu commanded 65.8% of all search queries in China. Sohu is coming off its brand-enshrining role as the official online reporter of this summer's Olympic Games in Beijing.

Ctrip remains the leading travel portal in a country where disposable incomes continue to grow, affording more time and money for business and leisure travel. That dovetails nicely into Home Inns, the fast-growing chain of value-minded lodging.

China Finance Online has taken a huge share price blow. Because it provides stock market research for individual investors, the initial assumption may be that the company has suffered given the massive setbacks in the Chinese equity markets. However, CFO's earnings have actually skyrocketed in spite of the market's downfall. Speculators are becoming investors, brushing up on analysis to stay a step ahead of the market gamblers.

NetEase, by comparison, has simply grazed its knees with a nearly 27% haircut. It's the leader in multiplayer online games, and the country's youth is flocking to Internet cafes to play interactive fantasy games like NetEase's flagship Fantasy Westward Journey. SINA remains a new media powerhouse, with revenue and earnings soaring 53% and 74% respectively in its latest quarter.    

More mental than fundamental
Share prices are contracting, but the fundamentals aren't deteriorating. In fact, in some cases they are actually improving. Analysts have actually revised profit targets higher on Baidu, NetEase, and Sohu over the past three months.

If you thought the stocks had attractive valuations based on forward earnings multiples over the summer, you will love what the fall has done in the fall. NetEase and Sohu are fetching 2009 profit multiples in the pre-teens. China Finance Online? Analysts see the company's bottom line growing by nearly 75% to $1.41 a share next year, yet the stock closed in the single digits last night.

There will always be risks of buying into China. Investors have geopolitical and even currency fluctuation concerns (though the latter has typically worked in the favor of stateside investors given the appreciating yuan versus the dollar). However, I defy anyone to weigh the growth rates and the valuations and come away with the conclusion that China is somehow overvalued.

Sometimes opportunity knocks. Other times it tears the door down, frame and all.

I guess it really is that good.   

Other ways to travel through China without a passport:

Baidu has still more than doubled since being singled out to Rule Breakers readers two years ago. NetEase is another Breakers pick. Ctrip.com is a Motley Fool Hidden Gems recommendation. SINA is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz has been a fan of China's growth stocks for several years now, even though he does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.