It has been a rough year for investors in China, especially those who forgot that it’s still a Communist nation with a government that can act unilaterally and change direction swiftly and ruthlessly. After some surprising, and very anticapitalist, moves in the past several months, Chinese stocks are plummeting. China’s market is down 20% in the past six months, while some of its biggest names have dropped more than 40%. Has China become uninvestible? No—but it has gotten a lot more complicated.

U.S. investors have largely…

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