Investors looking to play the Chinese market must first do their homework, Jim Cramer said Friday on CNBC's "Stop Trading!" segment.

Cramer said the strength of the world's fastest-growing big economy makes investing in so-called Red Chips -- the most-liquid stocks traded in China -- seem like a no-brainer to novice investors. But he said that that point of view, together with rising exchange-traded fund action tied to China, makes investing in these shares riskier, not safer.

Cramer pointed to the iShares FTSE/Xinhua China 25 ( FXI) ETF, which comprises the 25 largest and most-liquid Chinese stocks. Cramer noted that it rose 79% for 2006 -- but is down 10% in the New Year. Big component PetroChina ( PTR) is down 9% off last week's new high.

Cramer said the Chinese market offers great opportunity but that timing is key and that investors should let these names come in a bit before jumping in.

Cramer said Friday's downgrade of Exxon ( XOM), the company that did nothing during the run-up and only started to rally after the downturn, shows that there is no hiding even for those companies that played it safe and bought back stock.
At the time of publication, Cramer had no positions in stocks mentioned.

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