What happened

It's looking like a rough day for the Nasdaq Tuesday, with the tech-heavy index down 1.8% as of 1:45 p.m. ET. Shares of Chinese "mobile only" e-commerce site Pinduoduo (PDD 1.35%) are getting hit disproportionately hard however, down 11.8%. And you can blame The Wall Street Journal (WSJ) for this.  

So what

In a report on the disconnect between stock-market performance within China and the performance of Chinese stocks that trade in the United States, WSJ pointed out that "the total value of onshore Chinese stocks rose about 20% last year" -- but "Chinese stocks listed in the U.S." declined by 42%, on average.

That is quite a disconnect. But why is it happening?

Man examines a stock chart superimposed on a Chinese flag.

Image source: Getty Images.

As it turns out, much of the increase in the value of the Chinese stock market last year came about simply through the addition of new listings of companies on Chinese exchanges. Actual stock prices of domestic Chinese equities only rose about 5% (although that's still a big difference from the 42% haircut international investors suffered).

Now what

The big reason why this is happening, though, is what doesn't bode well for Pinduoduo. As WSJ explains, "China wants to shift the focus to furthering its capabilities in advanced technologies and manufacturing," and away from "the consumer internet sector, an area Beijing wants to de-emphasize."

As a result of the government favoring -- and in some cases actively promoting -- "advanced technologies and manufacturing," semiconductor companies, artificial intelligence, electric cars, and fintech stocks are the ones likely to perform well in China going forward, while e-commerce stocks like Pinduoduo are the ones that will suffer under continuing "clampdowns" by government regulators.

Responding to this theory, "global investors have already started rotating out of sectors that have fallen victim to China's changing policy priorities and into those that benefited," reports the Journal. As investors in U.S.-listed Chinese companies join in the sell-off today, it appears they, too, may finally be throwing in the towel on China.