China Mobile Ltd. (CHL) trades at about the same price-earnings multiple as U.S. based companies like Verizon Communications Inc. (VZ) and AT&T Inc. (T), but higher growth rates might make its stock a much better deal relative to its peers abroad.

China Mobile Ltd. [[CHL]], a leading Chinese telecom provider, is trading with a price-earnings multiple of just 12.42x despite posting net income growth of approximately 29.5%. This compares to 16.4% growth at its closest U.S.-based competitor Verizon Communications [[VZ]], which trades at a higher price-earnings multiple of 13.74x.

Using the price-earnings to growth ratio (PEG ratio), China Mobile trades at just 0.42 compared to 0.83, which suggests that it could be dramatically undervalued. In fact, a market-standard PEG ratio of 1.0 would yield a stock price of more than double its current price of $50.22. And if it were to trade at Verizon’s PEG ratio, its share price would be around $98.91.

China’s economy is also expected to grow much faster than the U.S. economy over the next several years. The Organization for Economic Cooperation and Development raised its forecast for China’s economic growth to 7.7% amid its stimulus measures in place. Meanwhile, domestic spending is expected to ramp up heavily as the country becomes richer.

As in the United States, telecom growth in China will likely come from value-added services like data. Revenue from these businesses jumped 23.8%, from 2007 to $16.6 billion, at China Mobile and represents one of its fastest growing segments. Meanwhile, SMS and video remain two other key areas that will drive growth over the next several years.

In the end, China Mobile remains an undervalued growth play by many measures. The stock trades at a valuation below that of comparable U.S. corporations and has strong growth prospects with over 488 million subscribers and counting. As a result, U.S. investors in more traditional telecoms may want to take a look at this strong Chinese play to diversify their portfolio.

The9 Limited (NCTY) is trading at a discount relative to peers like Giant Interactive Group Inc. (GA), Perfect World Co., Ltd. (PWRD) and Shanda Interactive Entertainment (SNDA), but is this an opportunity or a warning sign for investors?

The9 Limited [[NCTY]], an online game operator in China, is trading at just 5.8x earnings which makes it one of the cheapest Chinese online gaming stocks. In comparison, the industry as a whole trades at around 14x earnings with average growth rates of 9 percent and average gross margins of 36.81 percent. So, does The9 represent a compelling value or is there a reason for the steep discount relative to its peers?

On April 16, 2009, The9 suffered a major setback when Blizzard Entertainment decided to license its World of Warcraft game to Netease [[NTES]] following the expiration of its current license agreement with The9. The percentage of revenues derived from this contract is uncertain, but as of 2007 the company “derived substantially all of its revenues from WoW.” (Source: 20-F Filing)

During the fourth quarter of 2008, The9 reported revenues of $62.7 million which was down marginally from the comparable quarter a year ago. However, net income dropped 55 percent to $6.5 million as development expenses on its proprietary games consumed a large amount of cash. Unfortunately, there have been no quarterly or annual financial results reported since the contract was lost in April of this year.

Fortunately, The9 has several other games under contract from other companies like Electronic Arts [[ERTS]]. These games includes everything from sports games like FIFA Online to its own proprietary fantasy games like Dragon Empire. Whether or not these games provide enough revenues to cover the loss of its WoW contract remains to be seen, but some investors believe the worst may be over.

In the end, the current discount can be explained by the loss of its license to the popular World of Warcraft game from Blizzard Entertainment. Meanwhile, the success of The9 going forward will largely be the result of its proprietary games in development, which include The9 City, Dragon Empire, Warriors of Fate Online, and its ability to continue in other partnerships with companies like Electronic Arts.

Baidu, Inc. (BIDU) saw some upside from Google Inc.’s (GOOG) woes, after China temporarily barred its citizens from visiting a host of Google properties, including the main search engine, Google Apps, Google Reader and Gmail for 24-hours.

Baidu, Inc. [[BIDU]], the leading Chinese internet search provider, saw its shares jump nearly 10 percent since Google Inc.’s [[GOOG]] problems began earlier this week. While the temporary ban only affected the English-language Google web sites, the move casted further doubt on Google’s relationship with China, which now has the world’s largest internet audience.

Earlier this week, China’s foreign ministry accused Google’s English-language search engine of spreading vulgar content and instituted a nationwide ban between 9pm and midnight on Wednesday. However, the ban remained in place across many rural areas for a great deal longer than the 24-hours, which could deal a blow to the company’s attempts to gain market share.

Of course, some skeptics believe that the government’s ban was designed specifically to help the local internet search company Baidu. After all, the state’s broadcasting company, CCTV, relies on Baidu for a large slice of its advertising revenues and mounted a harsh campaign against Google this week. How much of a blow this deals, however, remains to be seen.

In the end, Baidu’s close relationship with China will likely continue to pay dividends down the road. Meanwhile, Google, the company’s largest competitor, appears to continue to face problems with the government that could rein in its attempts to gain market share.

Changyou.com Limited (CYOU) shares may be well above their initial public offering price, but the stock continues to trade a compelling valuation given its growth.

Changyou.com Limited [[CYOU]], a China-based online game developer and operator, is up nearly 90 percent from its initial public offering. However, shares continue to trade at just 7.14x with explosive historical growth rates and strong projection for the 2009. As a result, investors may want to take a second look at this young company as a strong play on China.

During the first quarter, Changyou.com reported net income of $33.5 million on total revenues of $61.6 million. This represented a 15% increase quarter-over-quarter and a 120% increase year-over-year, suggesting that this stock may be substantially undervalued at these levels. Meanwhile, active paying accounts also increased to 2.27 million – up 50% year-over-year.

“I’m pleased to have delivered another quarter of record results as we report for the first time as a standalone public company,” said Mr. Tao Wang, Changyou’s chief executive officer. “Online games, which provide low-cost entertainment, continue to be a very popular leisure time activity in China, even in an economic downturn, making the industry a strong defensive play.

“Our peak concurrent users and active paying accounts reached record highs during the quarter, demonstrating the efficacy of our strategy of focusing on the user experience. We continued to leverage synergies with our parent company Sohu.com Inc. (Sohu) and our expanded offline marketing efforts to reach gamers in new cities and increase our penetration in existing cities.

“With our strong execution capabilities, I’m confident that we can successfully extend the lifespan of our existing games and release new titles that capture the imagination and mindshare of China’s growing population of online gamers.”

In the end, Changyou.com trades with a conservative historical P/E to growth ratio of around 0.1 and a future ratio of 0.5. These numbers suggest that the stock is greatly undervalued at these levels given its potential growth rates, and may therefore represent a compelling opportunity for investors interested in adding a Chinese element to their portfolio.