My father has been selling good old American shopping bags to retailers for 50 years. But the Chinese make bags with the same quality of plastic in 10 times as many colors -- at a fraction of the cost. Fortunately my father has been able to switch mills, rep a Chinese manufacturer, and give his business a new lease on life.

Maybe you aren't so lucky and can't ally yourself with the Chinese. You're looking for some way to survive the Chinese threat -- maybe even profit from its booming economy. You want a hedge against China. So let me give you the best can't beat 'em, can't join 'em, might as well invest in 'em guide that I can muster.

The bottom line: Chinese Communists make crummy capitalists. You have to accept the fact that the same people who crushed freedom in Tiananmen Square are now trying to get your dollars to invest in their country -- even though they have shown nothing but contempt for our financial disclosure rules.

Of course, the Chinese are brutally efficient at making product. They can bring you a mock Tag Heuer that works as well as the original -- at least for a few months. Unfortunately, that timepiece is an apt metaphor for investing in the current crop of publicly traded Chinese companies.

But investing is all about potential -- and potential is all about market size. No matter how many times we bump up against the Communists who run the joint, the market is so big that we're tempted to look the other way from business practices that would make us sell everything short if these were United States businesses.

I know you're sick and tired of being beaten by the Chinese, and it would feel pretty good to make a few bucks by owning a piece of the competition. So here's my advice.

First, investing a substantial amount in just one Chinese enterprise is way too dangerous. In doing research for this article, for instance, I became enamored of 51Job Inc., a recent Chinese initial public offering that trades on the Nasdaq. This company, with its cool JOBS ticker symbol, seemed to have it all: a Chinese job placement service, with 1,400 employees, growing sales at 77% a year with increasing gross margins. I dutifully studied the prospectus as the company went public in September, read through the research, and concluded that this debt-free Chinese job finder could be just the fit for someone who has lost his own company to the Chinese. Ahh, but irony is a bitter investment tool. No sooner did I fall in love with JOBS than JOBS blew up.

That's right. In its very first public set of financials post-IPO, it reported an astounding shortfall, one that quickly lopped off more than 50% of its value! The decline was so astonishing that I thought the darned stock had split. Traders jokingly refer to it now as "25-and-a-half jobs."

And that kind of fall is not all that unusual in China. A little more than a year ago, the largest life insurer in the country, China Life, came public here with much fanfare, and the financials went sour soon after it got out of the chute.

While the Securities and Exchange Commission at times has been lax about IPOs, it still wields enough authority that most U.S. companies are afraid of bagging investors with bogus financials. Our legal system makes the CEOs of such companies professional defendants for life. China, unfortunately, has no such standards.

So why bother? Because of Chinese stocks like Shanda, that's why. Goldman Sachs brought this Chinese interactive gaming company public at $11 last summer at the height of the stock market's doldrums. Six months later, the Chinese obsession drove the stock to $44, a four bagger at a time when the S&P 500 and the Dow Jones Industrial Average virtually stood still.

I don't want you to buy Shanda now; the big money there has already been made. But there is one entry on the Chinese menu that's worth considering: China PowerShares Golden Dragon Halter USX China Portfolio. This recently created exchange-traded fund, or ETF, lists on the American Stock Exchange under the symbol PGJ. (An ETF is a mutual fund that trades like a stock.) Golden Dragon tracks the USX Halter China Index, which is made up of 38 companies that conduct most of their business in China. It's the perfect offset if your company's been trumped by a Chinese company that's taking sales away over here.

The companies in the index are diversified enough -- ranging from manufacturers to financials to oils and techs -- that I think it can hold up under the periodic attempts of the Chinese government to slow the economy there in order to control inflation. And the sheer number of offerings makes the index less vulnerable to the accounting irregularities that are sure to plague at least some of the holdings.

I like this ETF better than the FTSE/Xinhua China 25 Index, a slightly older exchange-traded fund that holds the 25 largest stocks on the Hong Kong Exchange. My reason: To be included in the Golden Dragon, companies have to be listed on an American exchange. An American listing creates at least a pretense of credibility that some of the FTSE/Xinhua holdings can't claim.

Of course, there are tons of other ways to play China. Wal-Mart and McDonald's have big and growing presences in China. American International Group sells lots of insurance in China. Avon's got a nice size business there. So does Home Depot. But these operations aren't big enough to make a difference on the bottom line, so they're not going to give you the impact you'd get from investing direct. A little bit of China is just a nice kicker to a much bigger worldwide business for these behemoths.

There are also traditional mutual funds that call themselves China funds, but most of them invest in Taiwan, Hong Kong, and even Singapore as well as mainland China.

And then there are the various commodity plays. China is short of just about everything: steel, copper, oil, electricity, uranium, you name it. But despite the Chinese angle, buying commodity stocks in a year when the Federal Reserve may raise rates five times to cool commodity prices makes very little sense to me.

One day, perhaps, the Chinese will recognize that market size doesn't trump transparency and -- let's call a spade a spade -- honesty when it comes to returning some of the fruits of their labor force to shareholders. Right now, though, the risks that you will be beaten once by the Chinese at your job, and then again by Chinese accounting chicanery, make owning anything other than an ETF too dangerous for all but true financial thrill seekers.

James J. Cramer is a markets commentator for CNBC and TheStreet.com. A frequent trader, he does not currently own any of the stocks mentioned.