What happened

Major Chinese stocks trading on U.S. exchanges continued struggling today amid important sectorwide news and the beginning of earnings season.

Shares of Chinese e-commerce specialists Alibaba (BABA 0.35%) and JD.com (JD -1.02%) were down roughly 8.5% and 5.5%, respectively, as of 9:52 a.m. ET. Meanwhile, shares of the online tutoring company TAL Education Group (TAL 0.84%) had fallen almost 9%.

So what

Earlier this week, Alibaba announced that it plans to do a dual stock listing and list shares in Hong Kong in addition to its current listing on the New York Stock Exchange. The company said it will list in Hong Kong before the end of the year. Management cited the fact that Hong Kong is a centerpiece of the company's "globalization strategy" and that it is "fully confident in China's economy and future."

Also, Chinese stocks are dealing with news this week that billionaire Jack Ma plans to step away from the large tech giant Ant Group, which is an affiliate of Alibaba. Ant Group has been trying to go public since 2020.

The move seems to be part of a broader effort to further separate Ant from Alibaba, which Ma founded. Several Ant executives have also recently severed ties with Alibaba. All of this may speed up Ant's eventual initial public offering, but investors may not see this as a positive for Alibaba.

Alibaba will also report earnings on Aug. 4, and analysts are expecting the company to post slowing revenue, which would be the company's first quarterly decline in revenue ever.

The Financial Times reported on Wednesday that Alibaba's U.S. subsidiary now no longer expects to achieve its goal of adding 1 million small to medium-sized businesses. The target is part of a broader push into the U.S. e-commerce market to compete with the likes of Amazon.

In other news, TAL Education Group just reported earnings for its first quarter of fiscal 2023. TAL generated a loss of $28.3 million on total revenue of $224 million. Revenue plunged nearly 84% year over year.

The market has been expecting a significant slowdown in revenue at TAL due to the Chinese government's crackdown on private tutoring, but it appears investors were disappointed all the same.

Now what

This week has been one to forget for Chinese stocks, despite what has been a largely positive month for U.S. stocks. Alibaba seems to be dealing with some legitimate business headwinds, although it's a bit unclear how Ma disassociating with the company will impact it going forward.

In recent months, the Chinese government has started to ease its regulatory crackdown that really hammered stocks last year. The country has also been dealing with a resurgence in COVID-19 cases, which has led to a lot of lockdowns in major Chinese cities.

I am really more concerned about these issues right now. If regulatory pressure can continue to ease and lockdowns do not impact the Chinese economy too much, then I think the sector has upside, but it's still a big if. If you are considering buying any of these stocks, prepare to hold for the long haul and expect near-term turbulence.