Not many people outside China have heard of Goodbaby Group. Neither had Chris Gradel until one day in late 2005, when a pile of the Shanghai company’s shares landed squarely in his lap — as part of a portfolio of publicly traded equities, distressed debt and private equity investments that his firm, Pacific Alliance Group, was purchasing at a steep discount from a large U.S. insurance company. After a little research, Gradel was impressed. Goodbaby, China’s largest manufacturer of strollers and...