The Olympics are bringing fresh attention and money to China at a time when some investors might prefer to forget about it.

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NEW YORK — The Olympics are bringing fresh attention and money to China at a time when some investors might prefer to forget about it.

Stocks in the country have fallen sharply since last fall, a painful reminder that hard times can come to a nation where “up” once seemed like the only direction for stocks. The declines are raising questions about whether the much-heralded economic expansion of China is simply on hiatus or in for a more pronounced pullback.

Frederick Jiang, manager of the Ivy Pacific Opportunities Fund, says the downturn in stocks could benefit investors.

“I think it’s going to be a great opportunity to buy Chinese shares because the long-term growth will be there. China is going to grow probably three times as fast as the global average,” he said.

“It’s a very strong valuation case,” Jiang said of the decline that has left stocks down more than 40 percent and those shares restricted to Chinese investors down more than 50 percent from last fall.

Mutual funds hit

Even investors in diversified vehicles such as mutual funds have taken a hit. China region mutual funds showed a negative return of 26.7 percent this year through the end of July, according to fund tracker Lipper.

Still, China region funds are showing a five-year annualized return of 21.7 percent as of the end of July and a 10-year annualized return of 16.8 percent.

But while the drop in stocks has meant investors could be getting a better deal when they buy, it doesn’t mean the risks have disappeared.

Jiang blames a scarcity of resources from oil to raw materials like iron ore with squeezing economic growth.

He doesn’t think an economy running at a steadier pace rather than a sprint is a bad thing. The double-digit growth of the past five years is too much, he contends.

“I don’t think China should go back to the 11 to 12 percent rate. That’s overheated.” He contends it should be closer to 9 to 10 percent.

A moderate pullback in the economy could actually benefit longer-term investors, Jiang contends.

“This slowdown should help China to sustain growth for the longer term,” he said. “When growth slows down, the demand for energy and the demand for metal will come down. That may bring down the inflation.”

Andrew Foster, acting chief investment officer of Matthews Asian Funds, also contends China has grown too quickly but he is encouraged that more of its recent economic expansion has come from domestic demand, not simply from exports to the U.S. and other countries. This signifies an economy that is maturing, he said. That’s not to say the world’s factory wouldn’t be hit by a weak global economy. “A slowdown in the U.S. and especially a global slowdown will hit China,” Foster said.

“Growth hasn’t fallen off a cliff. It’s holding up reasonably well but moderating. That’s true in corporate earnings as well as the macro economy,” Foster said.

While he thinks the drop in stocks in response to the cooling economy has been overwrought, he remains concerned about rising prices.

“Every major political transition in China has had inflation at either the backdrop or at the forefront,” he said.

Government response

But Foster hopes the government won’t react hastily as it tries to control inflation.

“Does an increase in the inflation rate cause government officials to clamp down on the kinds of reforms that have so benefited China’s economy?”

Ultimately, regardless of how bullish investors might be on the country’s prospects, it’s not wise to invest too heavily there, Foster warned. As with any investment, a measured approach is best.

“I do think investors should have some part of their portfolio dedicated to these emerging growth stories in Asia,” Foster said.

‘I would question whether most investors are well-served to have dedicated exposure to a single country. It’s just too volatile.”