Chinese stocks are falling from the sky, and for good reasons. The Chinese government has been tightening its regulatory grip across an increasing number of industries ranging from tech to property. While the crackdown initially seemed to be over data security concerns, Beijing's latest move to ban for-profit tutoring classes is a rude shock. 

Right now, no one knows which company or sector in the Chinese government will target next. As a result, nervous investors are selling first and asking questions later. 

But as a longtime investor in Chinese companies, I see this wave of panic-selling as an opportunity. Solid growth stocks like JD.com (NASDAQ:JD) and LexinFintech Holdings (NASDAQ:LX) are now trading at a rare discount. Here's why these two Chinese growth stocks have been on my watchlist.

Three ladies shopping on their phones.

Image source: Getty Images.

1. JD.com

From humble beginnings as an e-commerce start-up, JD has transformed into an internet titan with interests spanning fintech, logistics, health, and more. This growing ecosystem has given JD a massive annual active customer base of 500 million -- and the moniker "Amazon of China."

There are many reasons to like JD. First, it has a stellar track record of execution and growth. Between 2015 and 2020, JD's revenue grew at a compound annual growth rate (CAGR) of 33%, hitting a record 746 billion yuan (roughly $114.3 billion) in revenue in 2020. 

Even more impressive is the fact that JD is already profitable. That's uncommon among companies growing at such a speed. In 2020 alone, JD generated free cash flow of 35 billion yuan. Being profitable gives JD firepower to grow its younger businesses like JD Health, JD Logistics, and JD Digits. These side bets are growing faster than JD's core e-commerce business and will fuel JD's growth for years to come.

On top of that, JD looks attractive from a valuation standpoint. The stock trades at 14 times earnings, while Amazon trades at 69 times earnings. Korean e-commerce giant Coupang -- a company that's also often compared to Amazon -- trades at 5.4 times 2020 sales. JD, for perspective, trades at one-sixth of that valuation. While Coupang is growing faster than JD, it's far from profitable. And JD is still growing fast, making this valuation gap too wide to ignore.

2. LexinFintech Holdings 

LexinFintech began as an online lending fintech, but it is now evolving into a consumption platform where young people shop and spend their money. JD was an early investor in LexinFintech and continues to be a strategic partner and supplier. In hindsight, it's easy to see why the companies work well together. After all, LexinFintech -- like JD -- has been delivering on its promises. 

Over the past three years, LexinFintech's registered user base grew more than threefold -- from 42 million to 132 million as of March 31, 2021. During this period, quarterly active users jumped 156% to 8.2 million. As a result, its loan balance surged 135% -- hitting a record 82.4 billion yuan in the first quarter of 2021.

While 2020 was a challenging year for LexinFintech -- as it was for most companies -- things are now looking up. LexinFintech reported 771 million yuan (roughly $121 million) in adjusted net income for the first quarter of 2021, an all-time high. This year, the company has a loan origination target of between 240 billion and 250 billion yuan, up at least 36% from 2020.

As part of its transformation into a digital retail platform, LexinFintech is revving up new growth engines. In February it launched Maiya, a buy-now-pay-later (BNPL) service for the Chinese market. Although BNPL is still new in China, Maiya has caught on like wildfire. LexinFintech expects Maiya to hit 300 million yuan of gross merchandise value (GMV) in the second quarter of 2021, up from 60 million yuan in the first quarter. If LexinFintech can keep growing this business, Maiya has a shot at becoming the Affirm of China, unlocking a valuable source of revenue for the company.

Despite its bright long-term prospects, LexinFintech stock appears to have flown largely under the radar. The company delivered roughly $121 million of net profit in the first quarter of 2021. On an annualized basis, that works out to about $484 million for the year. Factoring that into its current market capitalization of $1.5 billion, LexinFintech is trading at about three times earnings. Like JD, this stock offers potentially promising rewards -- at a very interesting price.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.