Have you noticed what's going on in the Chinese stock market lately? Let me bring you up to speed in case you've missed it. The stock markets in the Far East have been crashing in a manner that makes the infamous Black Monday on Wall Street look like a walk in the park. The Shanghai Composite Index is down more than 50% from its peak of 6,092.06 points in October, and Hong Kong's Hang Seng Index has fallen more than 20%.

These large drops in the Chinese stock markets are eerily reminiscent of the Nasdaq crash of 2000. Valuations in China spun out of control as investors bid up everything in anticipation of the Beijing Olympic Games, causing an unsustainable bubble. Unfortunately, the bulls on China were a bit overly optimistic, and the bears faded the "Olympic Trade" and sold with force.

Of course, it's worth noting that investors in China can't short stocks -- it's illegal -- and this played a big part in extending the stock bubble to levels it most likely wouldn't have reached.

The massive plunge in Chinese stocks has created some mouth-watering opportunities in the left for dead Chinese American depositary shares and China-based stocks that trade in America. Investors have literally left the Chinese market for dead, and the blood is flowing through the streets of Beijing and Shanghai. Now is the time to pick through the rubble and find the stocks that have been beaten-down and are at remarkable values. Heck, you never know one of the following names could be the next Baidu.com (BIDU) or Sohu.com (SOHU). Or in our world, Google (GOOG) or Apple (AAPL).

Here are five Chinese stocks that could double.

First up is Giant Interactive (GA), a leading online game developer that controls one of the most popular games in China, ZT Online. The future for this company couldn't look brighter due to the exploding growth of online gaming in China. China's sales revenues for the online gaming market jumped 61.5% from the previous year to CNY10.57 billion, and the number of online game users soared to 40.17 million, up 23% year over year. This is the kind of growth investors dream of for any sector.

Giant Interactive also controls a 25% stake in 51.com, China's largest independent social networking website. The social networking powerhouse is set to come public through an IPO on the Nasdaq by the end of next year. Giant is sure to capitalize off that IPO, and the synergies to market its games through the site are enormous. The stock trades at a forward P/E ratio of only 8, yet it grew net income at an impressive rate of 36% year over year in the first quarter. Giant Interactive also has a strong cash position of $800 million and zero debt.

The stock has fallen over 30% since a big earthquake rocked China back in May. Investors should use the weakness created by the earthquake and the plunging Chinese stock market to pick up the shares on the cheap. This stock has the potential to double or more if the company can continue to execute and introduce more blockbuster games.

Next up is China Precision Steel (CPSL), a company that specializes in turning raw steel into a specialty premium steel used for applications such as automobile components, saw blades, textile needles, plane friction discs, food packaging materials and microelectronics.

This company is growing profits and revenues like gangbusters. Recently, the company reported a 231% surge in net income for the third quarter at $4.6 million, vs. $1.4 million for the same period a year ago. Revenues for the third quarter soared 61.3% to $18.7 million, vs. $11.6 million last year. The company is also expanding margins and exports at a rapid pace as China and the rest of the world increases its demand for specialty steel.

Check out the financials at China Precision Steel: market cap of $196.43 million, EBITDA of $17 million, forward P/E ratio of 11, $14 million in cash and no long-term debt. The bears are all over this name, with 21% of the float sold short. I really don't see what the short-sellers are thinking here. I expect a major short squeeze to develop that will destroy the bears and take this stock up 100%. Buy the stock, and don't miss out on the move.

Another name that has huge potential to double is Cogo Group (COGO), a leading module design solutions provider that procures core technologies from vendors and suppliers that produce critical enabling components. Cogo then develops application technologies around these enabling components. This company has its hands in everything from powering cellular phones and handheld devices to helping telecommunication firms provide services and delivering technologies for home digital entertainment systems.

Recently, the firm reported a 27% jump in second-quarter profits despite what CEO Jeffrey Kang described as the worst business conditions the company had seen in years. It's probably a safe bet to assume that the current quarter should be much better due to stronger demand for Cogo's products spurred on by the Beijing Olympic Games.

I don't expect consumer demand for Cogo's products to stop once the Olympics end. China's middle class is growing fast, and more consumers will have the purchasing power to buy cell phones and many of the other electronic products the company makes components for. The McKinsey Global Institute is projecting China's middle class to increase from 43% of the population today to 76% by 2025. I don't see how this firm doesn't win as China's middle class rises.

From a financial standpoint, this company is in an extremely strong position. Cogo has $122 million in cash, zero debt, EBITDA of $26.24 million and a forward P/E ratio of only 6.9. The company generates more in revenues at $266 million than their entire market cap of $215 million. I see another big short squeeze coming for this stock. The bears are short around 8% of the float. I believe the bears are wrong and will be forced to cover at much higher prices. Get your position on before it happens.

Another Chinese stock that could be ready to make a large move higher is China BAK Battery (CBAK). China BAK makes rechargeable lithium-based battery cells that are used to power cellular phones, notebook computers, digital cameras, MP3 music players, portable gaming devices and other applications, such as electric bicycles and hybrid electric cars.

This company is in the sweet spot for electronic gadgets that consumers in China love to own. Currently, China has over 416 million cell phone users. That numbers is expected to grow by another 250 million in the next five years. Sales for laptop computers in China soared 47.5% from a year earlier to 1.897 million units for the second quarter of 2008. This is some amazing growth that China BAK is well-positioned to capitalize off of. The company is also working on some hybrid car batteries based on nanotechnology with General Motors (GM).

China BAK Battery isn't profitable yet, but during the third quarter, the company paired its net loss to $2.3 million, vs. $2.7 million for the same quarter last year. Net revenues for the third quarter soared 132% to a new record of $68.5 million, and the company also improved its gross margins.

Have a peek at the financials for China BAK Battery: market cap of $250 million, projected revenues for 2008 of $210 million and EBITDA of $8.10 million. The company has a very small float available for trading at 33 million shares. The bears are short around 12% of that float. If the company turns profitable this year, which Wall Street is projecting, the stock will explode higher as the shorts are forced to move on.

One more Chinese name that could jump 100% or even more is Shengdatech (SDTH). Shengdatech makes nano-precipitated calcium carbonate, or NPCC, which has special physical and chemical properties that helps to increase strength in products such as tires, polyvinyl chloride, paints, paper, rubber, latex, plastics polyethylene and polypropylene products. The company also sells coal-based chemical products such as fertilizers and pesticides to plants and farmers.

Demand for NPCC is growing at double-digit rates, and the company controls 10% of the market share. In June, the company invested $56 million to build a new NPCC production facility that will have a capacity of 120,000 metric tons. Shengdatech plans to expand its total annual production of NPCC to 310,000 metric tons by the end of 2009. This is sharply up from April's capacity of 190,000 metric ton.

Recently, the company acquired a Chinese nitrogenous fertilizer company. Management said that if current market demand doesn't change, it sees the new company going fully operational by next year and yielding annual sales of around three times of the company's current chemical business. These are the type of acquisitions shareholders should get excited about.

The company has $18 million in cash on the books and zero debt. The stock trades at a forward P/E ratio of 11 and generates an EBITDA of $34.87 million. Around 14% of the 33-million-share float is sold short. I believe the bears are again leaning on the wrong Chinese stock at the wrong time. Look to buy this stock on any dip.

A note from James Altucher:

Every weekend I send an email to Jim Cramer and several hedge fund managers about the most interesting portfolios posted on Stockpickr that week. Usually those portfolios not only list stocks according to a theme but also offer significant analysis as to why the stocks are cheap.

Here are some examples:

Stocks related to drilling the Marcellus Shale

MLPS with yields above 7%

Microcaps trading for less than tangible book

Stocks that do well after Hurricanes

Here's the challenge: Build a portfolio at Stockpickr.com with great analysis, and send me the link. Each great portfolio (with analysis) will get posted on TheStreet.com with your byline (as a "Stockpickr Guest Columnist") and will be included in my email I send to Jim and the other
hedge fund managers on my list.

Posted on Aug. 13, 2008