Mainland China has been subject to the biggest stock market booms and busts of the past five years. The Shanghai Composite soared from a low of 1,030 in June 2005 to a high of 6,036 in October 2007, before plummeting back down to 1,706 by November 2008. Since then, Shanghai has rallied back to 2,652 -- still well short of half of its peak. Ironically, the best way to profit from Chinese growth may not be through investing in China itself, but by focusing on Asia's other Chinese-dominated economies.

The Overseas Chinese

Although mainland China boasts a population of more than 1.3 billion, the roughly 60 million "overseas Chinese" constitute one of the most potent economic forces on the planet. The overseas Chinese dominate the trading, banking and property industries throughout Southeast Asia. With the assets of the worldwide Chinese diaspora estimated as high as $3 trillion, the overseas Chinese may represent a greater economic force than mainland China itself. The Chinese make up a majority of the population of Singapore (75%) and significant minority populations in Malaysia (24.5%) and Thailand (14%). Even in countries where their absolute numbers are small -- Indonesia, the Philippines, and Vietnam -- the Chinese account for a disproportionate level of economic influence. As a rule of thumb, if you do business in East and Southeast Asia outside of Japan and Korea, you actually are doing business with the Chinese.

The World Economic Forum ranks the Chinese-dominated economies of Singapore, Hong Kong, and Taiwan among the most competitive economies globally, ranking them 5th, 11th, and 17th, respectively. Mainland China ranks a mere 30th, while the United States ranks 1st. The relative achievements of these Chinese-dominated economies are even more impressive. Consider that the combined foreign reserves of Hong Kong, Taiwan and Singapore stand at $647 billion. That's equal to 33% of the reserves of mainland China, while these three countries boast only about 1/40th of mainland China's population. With this kind of efficiency, it's not hard to see why these three "other Chinas" may be a better investment bet than mainland China itself.

Hong Kong

Although it reverted back to mainland China in 1997, Hong Kong has remained one of the "freest" economies in the world. Today, Hong Kong also offers the most direct way to profit from the $585 billon Chinese stimulus package. After the collapse in emerging markets, Hong Kong stocks hit single-digit price-to-earnings (P/E) ratios. In the past, every time the market collapsed to such low levels, Hong Kong stocks have gone on to double and even triple within a few years.

And the Hong Kong market benefits from another tailwind. Although it is thousands of miles away from Washington D.C., the Hong Kong stock market is subject to the whims of the U.S. Fed's interest rate policy. For the last 25 years, the Hong Kong dollar has been worth about $7.80, a level enforced through an interest rate policy implemented by Hong Kong's currency board. The result? Hong Kong's stock market is subject to wild "booms and busts" every time the Fed loosens monetary policy. Every time the Fed cuts real interest rates to zero -- as it did in 1992-1993, and again in 2003-2005 -- the Hong Kong stock market has doubled. The market is set to do the same this time around. Indeed, a few weeks ago, the Hong Kong stock market crossed the all-important, 200-day moving average, confirming a long-term uptrend.

Taiwan

With nearly 40% of its exports going to China, Taiwan's economy is almost as closely tied to the fortunes of mainland China as is Hong Kong. Taiwan Semiconductor, the world's top contract chip maker, recently announced that it has started adding hundreds of staff at its research and development department and other manufacturing plants. Why? New demand is arising from China's economic stimulus plan that has encouraged spending on electronics in rural areas.

Perhaps even more importantly, just a few weeks ago, Taiwan's voters gave a resounding victory to Ma Ying-jeou of the opposition Kuomintang (KMT) party in the island's presidential election. This could mark a watershed in Taiwan's history. The KMT advocates a free-trade agreement and eventually a full-fledged common market with mainland China. The Taiwanese market has soared in recent weeks, as the new government decided to allow mainland Chinese institutional investors to invest in the Taiwanese stock market. Long-term investors are betting that an eventual merger between mainland China and Taiwan is inevitable. One caveat: The Taiwanese market has always been one of the most volatile markets on the planet. And its tech-heavy index also has a reputation as "Nasdaq East" and trades much like its original U.S. namesake.

Singapore

As an island-state located at the tip of the Malay Peninsula with a population of about 4.4 million, the secret to the success of this straitlaced city-state is the diametric opposite of the individualistic, entrepreneurial-driven success of Silicon Valley. Singapore's authorities are famously interventionist, having power to prosecute individuals who violate laws relating to "improper use of the Internet." They once even famously banned the sale of chewing gum.

Singapore has been hit hard by the global economic downturn. Its economy contracted 16.4% in the fourth quarter, compared to the same period in the previous year, and shrunk another 19.7% in the first quarter of this year. A collapse in Singapore's exports has led to increased unemployment, which forced the government to cut taxes and subsidize jobs. The International Monetary Fund (IMF) estimates Singapore's GDP may decline by as much as 10% this year, dwarfing the declines in most Western economies.

Yet the philosopher kings of Singapore have gotten the basics right. Singapore's low corporate tax and personal tax rates, very low levels of corruption, skilled workforce, stable environment, and efficient infrastructure have made it a model for much of Asia. Singapore also has become the world's fastest-growing offshore banking center, and its strict bank secrecy laws and a favorable tax regime have put the country on track to become the 21st century's answer to Switzerland.

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