When I tell people I'm buying stocks in China, I get shocked stares. After all, successful short-seller Jim Chanos is publicly proclaiming the demise of China's housing industry, while 92% of real estate investors in China remain bullish on property prices. If ever there were a clearer divide between the smart money and the dumb money, I haven't seen it.

Given those circumstances, why am I still buying Chinese stocks?

It's a good question
Investors should not consider China one giant market monolith. In fact, it's home to at least two very different investment environments. The first is tier one China. This is the China that's covered every day in the papers, the China that's home to such architectural monuments as the CCTV Tower in Beijing and the Oriental Pearl in Shanghai, and the China that gives us giant state-owned enterprises such as PetroChina (NYSE:PTR) and hot consumer and Internet stocks such as China Finance Online (NASDAQ:JRJC) and Baidu.com (NASDAQ:BIDU).

This China is expensive -- perhaps even bubbly -- and I am avoiding it like the plague. But there is another China that remains ripe for investment opportunity, and while I first told you about it months ago, I suspect many of you did not take my advice.

You had your reasons
If investing in China takes a leap of faith, then investing in the China I want you to consider may make you reread your Soren Kierkegaard. That's because I want you to move from tier one China into tier two, three, or even four China, where the people are poorer, the companies are smaller, and the track records are shorter.

Why would I ask you to consider this seemingly outlandish shift in strategy? Because by doing so you will get cheaper stocks, faster growth, and more sustainable economic tailwinds.

A story you may have missed
A big story in China recently was the release of the government's first policy document of 2010. Known as the No. 1 Central Document, this annually details the issue the Chinese government will focus on most in the coming year. What is this year's priority? For the seventh year in a row, it's to continue to develop rural areas in China and raise rural incomes. According to the China Daily newspaper, this will mean investing more in farming, expanding rural pension and health-care systems, and subsidizing the expansion of agricultural infrastructure.

Now, the government has already been at this for a while, and as I wrote back in June, this is why rural China is the fastest-growing part of the country. Yet, unlike stocks in tier one China, rural China stocks remain relatively cheap -- with tier one P/Es at 17 against just 13 for the rest of the country. This is why rural China is still a great place to invest.

What to do about that
Back in July, we introduced our China Rural Boom basket of stocks at Motley Fool Global Gains in order to make money from this startling discrepancy between our outlook for and the market's valuation of rural China. The basket included two small plays in China's agricultural sector, two plays on the rural Chinese consumer, and one megamultinational with a clear China strategy to balance out the risk profile.

Our investing thesis is that a variety of subsidies and incentives will enable Chinese farmers to not only purchase items such as fertilizer, seeds, and equipment, but also become consumers of more discretionary items such as household appliances, mobile phones, and prepared foods. Thus, you might correctly guess that Coca-Cola (NYSE:KO) -- the aforementioned megamultinational -- and China Mobile (NYSE:CHL) are two components of our rural China basket.

These are both well-run companies with strong cash flows and established brands in China. Further, in the case of China Mobile, we believe that while new offerings from China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) have made tier one markets in China markedly more competitive, China Mobile continues to dominate rural areas. While this will depress the company's average revenue per subscriber in the near term, a mass of loyal rural subscribers should generate significant long-term value for the company and its shareholders -- value that the market is currently underestimating.

How it's doing so far
Our basket of five rural China stocks is already up more than 50% overall, but given the growth that I expect to take place in rural China in 2010 and beyond, it still has room to run. This is why investors shouldn't be avoiding or shorting China outright these days, but rather focusing their exposure on rural China -- the fast-growing part of the country that most investors and the media are both ignoring.

You already know two of our rural China picks, both of which we're firmly behind, but I encourage you to join Global Gains and read up on the other three. Click here for more information.

Tim Hanson is co-advisor of Motley Fool Global Gains. He does not own shares of any company mentioned. Baidu.com and China Finance Online are Motley Fool Rule Breakers recommendations. Coca-Cola is an Inside Value selection. The Motley Fool owns shares of China Mobile. This is the Fool's disclosure p-to-the-o-to-the-l-i-c-y.