Are you familiar with Jack Ma or Alibaba? If you follow emerging markets or Chinese companies then you most certainly are. In fact, just tuning into any financial media these days would probably give you the basics of what we’re about to discuss.

Jack Ma is the equivalent of our Jeff Bezos, and the company he founded, Alibaba, is as close to Amazon as you’re going to get. Ma is a Chinese businessman and multi-billionaire, and one of the wealthiest people in the world – he’s also been a very outspoken business leader and critic of the Chinese government. Over the last year he found out the hard way that there is only one true leader in China. Unfortunately for Jack Ma, it ain’t him.

Enter Xi Jinping (Xi), China’s most powerful leader in decades. Xi is President of the People’s Republic of China and leader of the Chinese Communist Party, and he is no big fan of China’s new “Tech Titans.” It’s no secret that Xi rules more as a dictator than as the leader of a free society. In the last year he’s made it abundantly clear to China’s business leaders that he rules supreme, not them.

Jack Ma has largely been out of the public eye since last fall, when he gave another speech criticizing Chinese regulators for not allowing more innovation and progress. Apparently that was the last straw for Xi Jinping, and he stepped in to block a planned IPO for another of Jack Ma’s companies – Ant Group (a massive fintech company valued at $30+ billion). I won’t go into the full story here, as much has been written on the subject. But trust me, it only gets worse from there.

The bottom line – Ma got too big for his britches and Xi put him back in line. As one anonymous Beijing official put it, Mr. Ma should have “focused on giving back to the Party instead of just focusing on his own interests.”

Jack Ma was the poster child for China’s brutal crackdown, but his companies were far from the only ones affected – see Tencent and JD.com. In fact, Xi’s attempt to reign in China’s largest tech companies has taken down China’s stock market as a whole.

Below is a chart displaying the year-to-date performance of the Chinese stock market versus the U.S. market and other emerging markets.

You’ll immediately notice the dramatic outperformance of the U.S. market (S&P 500) vs. the Chinese market (iShares MSCI China ETF). The S&P 500 has gained almost +20% this year as opposed to a -15% loss for Chinese stocks. And Alibaba (BABA) is down nearly 30%. I also included the iShares Emerging Mkts ex China ETF, which excludes all Chinese companies, and it’s up over +7% YTD.

Investors in China’s market are clearly spooked and it’s reflected in Chinese stock prices. They have a right to be nervous. While it’s certainly true that over the last couple of decades China has increasingly embraced more free market principles, it is still ruled by a communist party. The ideals of free market capitalism and communism don’t exactly mesh completely.

The Chinese Communist Party rules, and what they say goes. If the regulations aren’t in their favor, rest assured that they will be rewritten as needed to accomplish their goals.

We will probably always have a portfolio position in China – most likely via a broader emerging markets investment. It is, after all, the second largest economy in the world. But, we go into it with our eyes wide open. Because as far as China’s stock market and economy have come over the years, it’s far from free.