Investing in China as becoming almost as common as hand-wringing over whether the country will surpass the U.S. as an economic superpower.

It's easy to see why, with GDP growth of almost 10.5% last year and an expanding middle class. Mutual funds focusing on China have come along for the ride: The average China-focused mutual fund tracked by Morningstar has returned 18.2% in the first five months of the year and has three-year annualized returns of 29%.

But there are dangers in putting too much money to work in any single country, even one with an economy as strong as China's. (Just witness Monday's 8% slide in the Chinese market.) And the Chinese government's decision to triple the stamp duty on stock trades last week, which was designed to cool an overheated market, offers a timely occasion to re-examine investing in the region.

"The average investor shouldn't even be owning a

China fund

, let alone be worried about what it's been doing," says Morningstar analyst Bill Rocco. "The China story is so accessible ... but

people don't think, 'Well, where does this fit into my portfolio?'"

Rather than putting money into a narrow fund concentrated on one emerging market, Rocco suggests that the average individual investor follow a strategy similar to their domestic holdings when investing internationally. Namely, large-cap funds and large market-oriented funds.

The analyst says it's wise to have at least two international holdings in your portfolio. "That second fund should be something like a diversified emerging markets fund, which has the entire developing world in its purview and is certainly paying significant attention to Chinese stocks," he says.

Rocco points out that you may be investing in China without necessarily knowing it. For example,

Citigroup

(C) - Get Report

is a domestic blue-cap with significant stake in the Chinese financial market.

For better or worse, investing in China has never been easier. With the launch of the open-end

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JP Morgan China Region (JCHAX) fund and the

ETF

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SPDR S&P China (JCHAX) earlier this year, there are now 17 open-end mutual funds, five closed-end funds and four exchange-traded funds concentrated on China. Together, they hold more than $14 billion in assets, according to Morningstar.

The

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iShares ETF/Xinhua China 25 Index (FXI) ETF is the largest of the bunch, with total assets of nearly $4.9 billion at the end of May.

The

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Matthews China (MCHFX) fund is the largest open-end fund, with around $1.175 billion in total assets.

Fund managers say the elevated tax on stock trades and other moves to cool speculation aren't necessarily a bad thing, given how overheated the market has become.

"The Asian market is a market dominated by retail investors," says Matthews China co-manager Richard Gao. "Currently there are 100 million stock investors in China, and this has been increasing rapidly in recent months. The stock valuation has gone up very high, and it is actually one of the most expensive stock markets in the world, trading at around 45 times P/E, so the market has almost doubled so far this year, on top of a strong performance last year."

Matthews China's top holding include Hong Kong-listed stocks China Life Insurance, China Vanke Co. China Mobile and Shanghai Zhenhua Port Machinery.

Edmund Harriss, portfolio manager of the

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Guinness Atkinson China and Hong Kong (ICHKX) fund, dismisses the impact of the drop in the Shanghai Composite Index on Wednesday last week, saying the mainland stock market is actually a poor indicator of the country's economic well-being.

That's because the insular Chinese stock market is largely off-limits to foreign investors and made up of fenced-in domestic investors who are unable to exchange their currency to invest in international markets.

Harris' fund invests primarily in Hong-Kong-listed manufacturing and financial services. His top holdings include PetroChina, China Mobile, CNOOC and Angang New Steel.