The Best Values in China

This may not be news to you, but I'll lead with it anyway:

China's stock market is on fire, and all things China in our markets are enjoying a similar, rapid rise. Even China Telecom (NYSE: CHA), a $69 billion giant, has more than doubled in the past year.

This next bit, however, may come as a surprise:

There are still fantastic long-term growth opportunities to be had among Chinese companies.

Where you won't find them
While picking up shares of infrastructure and commodity companies in China was a no-brainer the past few years, these companies are no longer cheap. Too many investors have caught on to the global boom in building.

What's more, current valuations imply that many investors expect the growth in buildings and infrastructure to continue unabated. But as Caterpillar made clear with its most recent earnings release, these are still cyclical companies with high fixed costs.

Instead, look to luxury
While iconic American names such as American International Group (NYSE: AIG) and Starbucks (Nasdaq: SBUX) don't immediately pop into mind when we think "China," these are solid ideas worth considering. Both brands enjoy widespread consumer awareness in China and should see their sales benefit from growth in the country's middle class.

There's also little doubt in my mind that consumer heavies such as Procter & Gamble , Kimberly-Clark (NYSE: KMB), and Avon (NYSE: AVP) will grow their sales as consumer spending increases in China and Southeast Asia. Today, almost three-quarters of P&G's $76.5 billion in sales is in developed markets. We should expect that ratio to decrease as the company increases its presence in emerging markets.

Japanese and Korean consumer goods companies such as Kao and Lotte also have opportunity ahead of them, though my favorite of this group is Unicharm -- a Japanese maker of diapers and other sanitary products that has pursued Chinese growth aggressively and boasts a leading share of the disposable diaper market in both Shanghai and Beijing. And while Unicharm's valuation is reasonable, you need access to the Tokyo Stock Exchange in order to pick up shares.

Foolish final thoughts
Although Chinese valuations are high, the opportunity in the country for investors is too big to ignore. For now, that means looking in some less obvious places to get hold of Chinese growth.

While the consumer staples I mention above may take some time to fully capitalize on China, they haven't seen the sharp run-up that so many Chinese companies have.