China boasts one of the world’s fastest-climbing economies. Its GDP growth this year is projected by economists to soar more than 8%, or roughly double the growth rate we’ll see in America. It’s no wonder then that the investment fraternity is aggressively pitching American investors to include Chinese stocks in their portfolios.

It would be a waste of time, though, to make that pitch to Breezy Jacobs, who wrote in a recent e-mail: “Dan, do your readers a favor and warn them about the pitfalls of investing in China. Everyone is saying what great growth there is there and my broker insisted I buy some Chinese stocks. Well, I bought five of them, mostly good names and a couple of speculative cheapies, and I’m losing money on all five. Since China is supposed to the next economic superpower, something has got to be wrong. I would be interested in some Wall Street observations.”

For starters, as far as stocks go, China is not the pot of gold at the end of the rainbow. This year, for example, the Chinese stock market is down about 10%, although it has rebounded about 15% from its July low. Moreover, in 2004, the Shanghai index of Class A shares (Chinese stocks available to local investors but mostly off limits to foreigners) fell 16%.

The Chinese strategy of one overseas stock enthusiast, Jim Melcher, who is president of Balestra Capital, is hands off. “I haven’t owned China for many years, and I don’t intend to,” he says. “Sure, China will grow, but there’s no certainty its stocks will do the same.”

Why hands off? Because China is not a hospitable environment for foreign investors, he says. In particular, he notes the following warning signs about China:

* A seriously impaired financial system, what with its nonperforming bank loans the worst of any country in the world.

* Huge real estate overbuilding.

* Poor securities regulations.

* Uncertainties about whether the country can sustain its above average economic growth.

One money manager and global investor, Jim Rogers of Rogers Holdings, is also shunning China. “I would await a better time to buy since I expect real estate in China to have a hard landing and scare people,” he says.

A New York-based monthly newsletter, the Complete Investor, disagrees. Not only is it gung-ho on China’s growth prospects, but it’s strongly pitching its subscribers on a couple of big Chinese energy producers with hefty dividends whose stocks, it believes, offer above average capital gains potential of about 30% to 50% over the next 12 months.

One of its picks is Cnooc ($63.57), whose plan to buy Unocal earlier this year was scotched by American regulators. It’s China’s third-largest company, has 2.1 billion barrels of oil in proven reserves, and posted a 69% profit increase in the first half. Growth-minded Cnooc, despite its failed Unocal takeover attempt, is using the $3.75 billion in cash on its balance sheet for additional acquisitions. Its sales last year were $6.65 billion. The newsletter views Cnooc, which offers a semiannual dividend of $1.29, about a 4% yield, “a low-risk buy for a target of $95.”

The other company is PetroChina ($76.28), which has proven reserves of 11 billion barrels of oil and 32.5 trillion cubic feet of natural gas, and owns or has interests in 15,000 gas stations. First-half profits jumped 36% on a 42% revenue gain. Last year’s sales were $46.9 billion. The newsletter figures new oil discoveries and some foreign acquisitions, coupled with a 4.9% dividend yield, make Petrochina “a solid low-risk holding for income investors and a buy for a target of $100.”

One money manager, Tom Postin, of Los Angeles-based P&W Partners, is an active player in foreign markets but not in China. Pointing to our government’s recent condemnation of the Chinese buildup of a nuclear arsenal, he says, “Politically, we’re at war with China, a war that will almost certainly get worse before it gets better, and that’s not where I want my clients’ money.”

dandordan@aol.com