Global investors are shocked to have discovered that China is run by communists.

Shares of online education companies collapsed recently after the government all but outlawed the industry, and internet behemoth Tencent Holdings Ltd. shed more than $50 billion of value at one point after state media declared electronic games to be "spiritual opium.”

China’s leaders are making abundantly clear where they stand on the tension between private profits and social wellbeing. These sudden regulatory shifts have thrown asset managers across the world into a frenzy of effort to understand and explain how prospects for investors in the second-largest economy have changed.