TAIPEI (TheStreet) -- A "reform" in China is Communist-speak for government-driven change in any system where something is so wrong that commoners dare to complain in a country unfriendly to free speech.

If there was ever a clear candidate for reforms, it's mainland China's stock markets. But reforms have been made, and problems persist. And they're spilling into the shares of Chinese firms traded on the more mature, more respected exchange in Hong Kong.

It's hard to know which numbers to pull from the deep cave of bear-run statistics for the 22-year-old A-shares in Shanghai and Shenzhen, the country's top financial centers.

The most timely is the Shanghai exchange's three-year low in the final week of August, after major Chinese firms such as Air China (601111.SS, 0753.HK) and FAW Car Co. (000800.SZ) reported financial setbacks in the first half of the year.

Current-year slack in China's mythological economic growth of around 9% to 10% a year over the past decade has hurt some of these iconic firms. Second-quarter growth was 7.6%, and the official full-year 2012 forecast is for 7.5%.

That's exactly where reforms are still lacking: getting Chinese companies back onto the fast growth track that previously inspired investor confidence.

Yet people are still trading stocks. They have experience and a dark sense of humor.

The Shanghai Composite Index was trading around 2,040 points this week. The index never recovered from a massive drop during the global financial crisis, when it hit a low of 1,747 points, down from more than 5,000 in late 2007. The Shenzhen Composite Index stood at around 845 this week, again well below pre-financial crisis levels. It touched a five-year low of 467.35 in November 2008.

China's bourses have faced particular emerging-exchange pressures, such as patchy regulations, spotty transparency at listed companies, and a perceived lack of value for minority shareholders. A class-action lawsuit last year against Chinese calcium carbonate maker ShengdaTech ( SDTH) over financial reporting issues highlighted some of these issues.

Keen to keep investors at least hopeful, officials in Beijing have pursued reforms such as a loosening of monetary policy while inflation eases and economic growth slows. In May, the country's central bank announced it would reduce by half a percentage point the share of deposits that commercial banks must keep in reserve -- meaning more money would be left for loans.

The government also has cut interest rates and propped up its own spending, particularly on infrastructure, another move that's potentially good for share prices.

Some market experts call today's stock market lows a bottoming-out and predict a turnaround as a result of the reforms. The government is likely to do even more for the economy once a new Communist leadership takes shape between mid-October and March 2013, according to an August report from Credit Suisse.

Chinese nationals and institutions usually buy A-shares, which are traded by locals in mainland China. Foreign investors in mainland stock markets trade B-shares but often prefer H-shares, those belonging to an index of Chinese firms listed on the better-regulated Hang Seng exchange in Hong Kong.

That index, the HSCE, has sagged this year compared to 2010 and 2011, as companies report struggles in the first half. However, it does not look to be threatened with anything like a three-year low.

"A-share market investors have predicted a strong turnaround on the back of interest cuts, reserve ratio requirement cuts, etc., and ended up feeling disappointed by a lack of economic recovery in China," warns Herbert Hui, markets analyst with DBS in Hong Kong.

Stick with Hong Kong for now, though low liquidity has made it hard for sellers to reinvest.

"Relatively speaking, investors in H-shares are more realistic, so there are some disappointments over the pace of recovery, but we are simply used to it," Hui says.

Bottoming out means, of course, stuff can be cheap. Valuations are hitting historical lows, as the current trailing 12-month price-to-earnings ratio is 9.2 for the MSCI China index, and H shares are reaching a low in historical valuation at 6.8 times trailing P/E.

"On a three- to five-year view, the potential for reversion to the norm is high, and so there should be a higher probability of gains than there is a risk of loss," says John Brebeck, senior adviser with the Taipei-based financial advisory company Quantum International Corp.

Well-run companies with business in natural resources or the domestic Chinese market have the highest odds of making money at an early date, as consumption remains strong and the country plumbs the world for fuel.

Try shares of China Coal Energy (1898.HK). They are trading almost level with their five-year low after a massive global financial crisis crash, although the miner and processor of the nation's all-important coal hasn't done anything glaringly wrong. It reported 5.4% revenue growth in the first half of 2012 from the same period a year ago.

On the consumption side, share prices in Shanghai Jin Jiang International Hotels (2006.HK) have hardly been lower since the 2008-2009 financial crisis, yet the expanding chain with 123,000 rooms total posted 7% revenue growth last year plus a gain in profits.

It's best to trade on the assumption that nothing improves any time soon. Wai Ho Leong, regional economist with Barclays Capital in Singapore, fears "uncertainties as to the strength of the government's policy response to the slowdown before the leadership transition."

Even after the transition we don't know how strong the response will be. China's economy is tethered to that of the fickle, volatile world now, anyway, so how effectively can the government alone fight back against a free market-driven decline?

Stocks may stay hollowed out for years, save for those of particularly sound companies in high-growth sectors that can sweat out broader economic trends.

Experienced China investors have priced in this long-term malaise, with H-share traders described as particularly inveterate bottom feeders. They're not waiting around for more reforms, though they may get a payback by picking just the right low-priced stocks.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.