New data shows that over the past three years, China doubled the amount of oil it imports from Saudi Arabia, to exceed 1 million barrels per day in 2009. Meanwhile, the U.S. dropped below the same threshold for the first time since 1988. That is but one of several 2009 milestones marking the eastward rebalancing in the world economy:

  • The Chinese car market grew by 46%, to become the largest car market in the world, ahead of the United Sates.
  • China was the largest source of foreign public stock offerings on U.S. exchanges last year, with 11 of 14 listings. Over the past five years, Chinese company initial public offerings raised $210 billion worldwide; American companies raised just $184 billion.
  • China passed Germany to become the world's largest exporter.
  • Japan just barely clung to its status as the world's second-largest economy in 2009, ahead of China. That order is unlikely to last another year. Adjusting for purchasing-power parity, China passed Japan some years ago.

"The Decade the World Tilted East"
In light of those facts, it's easy to see why Harvard financial historian Niall Ferguson recently penned an article in the Financial Times titled "The Decade the World Tilted East."

China's economic achievements over the past three decades have been nothing short of remarkable. The rebalancing that is occurring looks unlikely to reverse; a relative decline of U.S. economic standing appears inevitable.

However, it is by no means assured that China will leap past the U.S. in absolute terms on a precise schedule that simply extrapolates recent growth rates.

Long-term optimism and tactical contrarianism
China is an investors' conundrum, combining extraordinary potential with significant risks, including ethnic tensions, corruption, and enormous disparities in wealth and income. In order to balance risk and reward, I think the best approach combines a willingness to participate in China's long-term growth, along with a tactical contrarianism.

How does one apply this contrarianism? Investors' first inclination when investing internationally is to favor megacap stocks -- familiar names that provide a measure of reassurance. In China, they include:

Company

Market Capitalization

Price-to-Earnings Multiple*

PetroChina (NYSE: PTR)

$279 billion

12.2

China Life (NYSE: LFC)

$111 billion

23.9

CNOOC (NYSE: CEO)

$77 billion

18.0

China Telecom (NYSE: CHA)

$39 billion

14.3

*Based on companies' trailing-12-months earnings per share before extraordinary items.
Source: Capital IQ, a division of Standard & Poor's.

One contrarian strategy is to buck that instinct and look at smaller companies. Despite higher growth potential, many of these are cheaper than the four giants in the previous table, including:

Company

Market Capitalization

Price-to-Earnings Multiple*

Shanda Games (Nasdaq: GAME)

$1.7 billion

7.5

Zhongpin (Nasdaq: HOGS)

$453 million

8.5

Perfect World (Nasdaq: PWRD)

$1.1 billion

7.2

*Based on companies' trailing twelve months earnings-per-share before extraordinary items. Source: Capital IQ, a division of Standard & Poor's.

True, I cherry-picked these two sets of companies to some degree. But the fact remains that half of the Chinese stocks that trade on major U.S. exchanges with a market value of less than $2 billion sport a price-to-earnings multiple of less than 10.2.

Let me be clear: Part of that discount with respect to large-cap stocks is entirely justified when one considers that there is a lot less information and research available on smaller companies.

But what if you could close that research gap and take advantage of that discount, in the knowledge that you are investing only in profitable, well-run businesses?

Venturing off the beaten path
Last summer, Motley Fool Global Gains co-advisor Tim Hanson traveled to China on a research trip. He looked for opportunities in rural China -- including time on the ground in Inner Mongolia. One of the companies he discovered there was a small fertilizer producer, Yongye International, which has a huge potential market and is well-run. Best of all, the stock was inexpensive. Apparently, fertilizer doesn't stir investors' imaginations the way online gaming or paid search does.

This July, Tim and the Global Gains team return to China to follow up firsthand on existing recommendations -- and to look for new ideas that most stateside investors won't even pause to consider. If you don't own a piece of the long-term growth story called China, you aren't too late. Enter your email address in the box below, and you'll receive real-time updates from the team as they visit with companies, plus a special report that will contain only the best stock ideas to come out of the trip. It could be the first step to implementing a China strategy within your portfolio today -- an opportunity that's too large to ignore.

This article was originally published April 6, 2010. It has been updated.

Fool contributor Alex Dumortier loves macro-themed investing; he has no beneficial interest in any of the stocks mentioned in this article. Perfect World is a Motley Fool Rule Breakers pick. CNOOC and Yongye are Global Gains selections. The Motley Fool owns shares of Yongye and has a disclosure policy.