I poured my heart out for "you" a few days ago:
http://news.ycombinator.com/item?id=762531
Alibaba is a hub, but it's a very Chinese company; I was there in Hong Kong during their IPO and I can assure you, HK and all of China was abuzz. Nearly every Chinese factory has an account with them. You should be safe dealing with .cn firm through Alibaba, specially if they have verified accounts. You can use that post of mine to look for scam clues, but generally, your order will arrive, albeit a little bit overpriced. If you want fair market you should be at the market, in person, taking long rides to dusty villages like the rest of us ;-)
The price hikes are usually done by resellers, middle-men and brokers. Not all "Chinese" are Chinese; there are plenty of Overseas Chinese (Honkies, Malaysians, Taiwanese, Singaporeans, Vietnamese, even Filipino Chinese, who do business in the mainland and act as brokers to foreign companies.)
Indians are pretty safe too. The guidelines for doing business with Indians is different than doing with Chinese, but not by much. Indians are usually less polished in appearance; the Chinese spend a lot of money on image, so they have bigger office buildings, fancier sales brochures and the like. In my experience, specially in generic drugs and pharmaceuticals, the most efficient Indian "companies" have been a few guys, usually cousins, usually Punjabis, who did business outside a shared office in Hong Kong or Dubai but they did a great job delivering the goods as promised. Indians also have trained practitioners as salesmen; my pharmaceuticals sales guy was an oncologist (In China he would have been an English major, for example.)
Usually the best way to conduct an important business is to fly there. Even if you budget is $10k; I would say spend half of that on travel expenses and your eyes will be opened to the many possibilities out there.
I also dabbled in scrap metal and used cars; those two are the FOREX of the import/export world, rife with scammers and sometimes violent criminals.
Avoid any business that offers you "government connections"; this is where you will likely be robbed. If a partner hints at having government links and tells you he has the ability to avoid customs or shipping expenses, this is their way of appealing to your greed. There are plenty of Westerners who are dying to be friends with a rich 3rd world dictator, it's like an undocumented fetish. Play ball, and play by the rules.
More than Alibaba, I would be weary of any firm that has the label "drop-shipper" anywhere on its site. Big manufacturers don't sell to EBay kiddies; that's just weak and disgusting.