The past several weeks have been tough for fans of Chinese stocks. The Shanghai Composite Index is down 5% from February's peak, while the rest of the world's market indices are generally higher. And the underlying crackdown on the country's technology companies may not be over yet. Things could get worse before they get better.

The good news is, now that the dust is settling, investors don't have to keep their eye on every single corporate name to get a feel for what's going on in China. A trio of stocks are acting as barometers for China's entire tech sector.

Here's a closer look at all three, and what to watch with each.

A man looking at his smartphone. He is sitting at a desk with multiple computer screens on it.

Image source: Getty Images.

1. Alibaba

Although Beijing's ramp-up in regulatory pressure has been going on for months, it was arguably e-commerce giant Alibaba (BABA -2.36%) that got the ball rolling.

Shortly after founder Jack Ma criticized China's state-run banking system in October, regulators blocked the planned public offering of Alibaba-affiliated Ant Financial due to concerns that the organization failed to "meet information disclosure requirements."

Then, within a matter of days, China's State Administration for Market Regulation (SAMR) turned up the heat on its anti-monopoly efforts. While not officially aimed at Alibaba, in that Alibaba's TMall and Taobao websites facilitate more than half of the nation's total e-commerce (not to mention the company's commanding presence on other fronts), rising legal hurdles meant Alibaba had the most to lose. In April, the company was fined $2.8 billion for violating the country's anti-monopoly laws -- a decision CEO Daniel Zhang Yong publicly agreed with.

What to watch for: The SAMR's action against Alibaba might have been sufficient as a warning to all dissidents of what can happen when a Chinese corporation tests or criticizes the government. Or, maybe the point has yet to be made in full. We'll get an idea in the very near future when we see the response to several reports of sexual harassment of five female executives working for Alibaba. The company itself has put a "zero tolerance" policy in place as a response, but it would certainly be an opportunity for the state to establish greater oversight of Alibaba from another angle.

NIO ES6 electric vehicles drive down a road under blue skies

Image source: NIO.

2. NIO

China's electric vehicle manufacturers including Li Auto and NIO (NIO 1.53%) were supposed to compete with the likes of Tesla, not just there, but in markets outside of China as well. And to their credit, the country's young electric vehicle industry is making measurable progress. For instance, NIO's deliveries more than doubled year over year last quarter, driving a 127% improvement in vehicle revenue. Sure, the numbers were being compared to a COVID-19-crimped quarter, but NIO wasn't actually slowed by the pandemic. Last year's top line was still greater than 2019's, and this year's, as well as next year's, should also be up in a big way.

NIO may have just stumbled into trouble though, prompting headaches not just for itself but possibly for the nation's entire electric vehicle industry. This past weekend, a prominent Chinese entrepreneur was killed in a car crash while NIO's autopilot navigation system was in use.

The matter is under investigation, and even should NIO's technology be found at fault, it's not necessarily an irreversible setback for the company. But it's certainly a tough stretch.

What to watch for: Just a few months ago, expanded exports of electric vehicles was seen as one of the nation's chief economic growth opportunities. Now, its reputation within this market is at risk. It's possible China's regulators will respond with new sweeping rules that raise the bar for all self-driving tech installed on EVs made within the country's borders. At the very least, regulators will likely come down hard on this particular company, again if only to make an example of it.

Tencent video engineers work in the broadcast booth for the 2020 Olympics.

Tencent video engineers work in the broadcast booth for the 2020 Olympics. Image source: Tencent.

3. Tencent

Finally, add Tencent (TCEHY -2.09%) to your list of China's stocks to watch closely for the remainder of this month.

Initially, it looked as if Tencent stock's weakness since February was just collateral damage from a regulatory war ultimately intended to take Alibaba down a couple of proverbial pegs. That's turning out not to be the case though. Last month, the SAMR specifically ordered Tencent to abandon its exclusive music licensing rights, fining the company for its anticompetitive practices for good measure. Then, earlier this month an op-ed appearing in the online version of China's state-owned newspaper Economic Information Daily argued video games should no longer benefit from tax breaks granted to more conventional software companies, which would directly impact Tencent as well. The piece even went as far as to refer to video games as "opium for the mind."

The op-ed in question has since rephrased the most inflammatory aspects of its wording. But in many regards the nation's overseers may have still tipped their hand as to what they're thinking, and what sort of new regulations they may be planning. Underscoring the idea that something bigger may be brewing is another, similar commentary recently posted at China National Radio's website suggesting regulators should ban games that misrepresent history. Such measures would grant the state the authority to make judgments of gaming content and context.

What to watch for: There's nothing that's specific to Tencent to keep an eye out for. But if video gaming regulatory and taxation hurdles are indeed going to be raised soon, Tencent will be implicated as the company controls roughly half of the country's mobile gaming market.