(Money Magazine) -- Don't believe all the negative headlines you read about China -- and there have been plenty lately.
Sure, growth in the world's second-largest economy is expected to slow this year, to 8% from 9.2% last year and 10.4% in 2010. Still, that doesn't exactly qualify as a "hard landing" -- especially given anemic U.S. growth forecasts of 2% to 3%.
The most promising opportunities are keyed to the changing nature of China's expansion. Until recently, its economy largely grew on the back of strong exports to Europe and the U.S. Now, says Michelle Gibley, director of international research for Charles Schwab, "China is transitioning to a consumer-led economy."
As a result, U.S. multinationals aiming to sell their wares to China's burgeoning middle class look like good bets for American investors.
Blue chips lead the way: Perhaps the biggest success among U.S. companies so far is KFC and Pizza Hut owner Yum Brands (, Fortune 500), which now generates nearly 45% of its sales from China.
But many other U.S. blue chips are expanding rapidly there as well, says Peter Pham of AlphaVN.com, a research site that focuses on emerging Asian markets. Starbucks (, Fortune 500), for instance, is looking to nearly triple its store count in China by 2015. Coca-Cola ( , Fortune 500) is planning to invest $4 billion on expansion there in the next three years. And General Motors ( , Fortune 500) is partnering with Chinese auto maker SAIC to manufacture electric cars.
Another way to invest, says Pham, is via an exchange-traded fund that tracks corporate debt of multinationals in China. Several firms have issued "dim sum" bonds, denominated in the yuan and traded in Hong Kong.
You can buy them through a fund such as PowerShares Chinese Yuan Dim Sum Bond Portfolio (), with issues from firms like Ford ( , Fortune 500) and Caterpillar ( , Fortune 500). One caveat: Corporate bonds are inherently risky, so buying a basket of them trading in another currency isn't for everyone.
Don't ignore the locals: After a rough 2011, China's stock market is up slightly this year -- but it has been a bumpy ride due to concerns about the impact Europe's debt woes will have on China's economy.
To pick up blue chips such as China Mobile () and oil giant CNOOC ( ), Wade Balliet, director of equities for Bank of the West's wealth management investment advisory team, recommends iShares MSCI China Index ( ) or the iShares FTSE China Index ( ) ETFs.
For exposure to other emerging markets in addition to China, look at the MONEY 70's Vanguard Emerging Markets Stock Index Fund (), with four Chinese companies among its top 10 holdings, or T. Rowe Price Emerging Markets ( ) with two growth bets in its top 20: search engine Baidu ( ) and Tencent, a social networking giant.
In the short run, there are risks to betting on China. In the long run, the country's top stocks, like China itself, are too big and have too much potential to ignore. ?
First Published: July 3, 2012: 12:25 PM ET