Between July 22 and July 27, the Nasdaq Golden Dragon China Index - which tracks 98 of China's biggest firms listed in the United States - crashed by more than 22 per cent. The proximate cause was the Chinese government's new regulations on the country's US$100 billion (S$135 billion) after-school education industry that require companies to operate as non-profit entities and bar them from raising foreign capital. This unnerved investors in Chinese companies who feared new restrictions on other sectors too. The regulatory crackdown was not a one-off. After China's ride-hailing giant Didi listed in the US earlier this month, the Chinese authorities removed it from China's app stores on concerns about its data practices. Last October, China's regulators stopped the US initial public offering of Alibaba-owned fintech Ant Financial. And Internet giants Tencent and Baidu have been fined for some of their past acquisitions.

Shell-shocked investors in Chinese companies are trying to make sense of why Beijing's regulators are on the warpath. Most analysts agree that there are multiple motives. One is antitrust concerns similar to those raised by US and European regulators. Like some of their Western counterparts, China's Internet giants have been acquiring their smaller rivals, thereby snuffing out competition. Then there are social concerns. There are, for example, allegations that the high fees charged by after-school education companies disadvantage poorer families and raise the cost of child-rearing, thereby perpetuating both inequality and China's demographic problems. And Internet giants rely on armies of poorly paid contract workers while their executives are handsomely compensated. There are also security issues, which have come into sharper focus since the US passed a law last December requiring audits of foreign companies seeking to list there. Chinese regulators are concerned that this may lead to sensitive data being shared overseas.