As China's middle class grows and the country modernizes its infrastructure, it makes sense to allocate to areas where money must be spent. Property development in Hong Kong doesn't play into this theme. However, money must be spent on China's water problem. Duoyuan Global Water (DGW), which cleans water, recently debuted on the NYSE.
China must also improve its roads and its railway system to encourage integration between the nation's rich cities and poorer parts of the country. Companies like Cheung Kong Infrastructure Holdings and China Railway Construction will be a part of the solution.
While China imports plenty of the resources it will need, a lot of it comes companies like Jiangxi Copper or coal producer China Shenhua Energy.
And what about solar companies, such as Yingli Green Energy Holding (YGE - Get Report) or Solarfun Power Holdings (SOLF)? They seem like a logical bet if coal-dependent China decides to address its air-quality problems. But it's not clear to me that China views solar energy as a worthwhile investment.Hong Kong stocks and ETFs could be a good long-term holding, but I believe you'll get a different outcome than if you were investing in mainland China, specifically. There are also industry-specific funds, such as the iShares Emerging Market Infrastructure Index Fund (EMIF - Get Report) and the PowerShares Global Coal Portfolio (PKOL), which target some of these themes. The Shanghai Composite is up 80% this year. While it still has a long way to go before getting to its bull market high, there is no reason it won't decline 20% to 30%. A drop wouldn't mean the theme is over but there will be big moves in both directions. Still, it makes more sense to add emerging market volatility this way than with property stocks.