We all have our biases. Here's one of mine: I've never been a big fan of investing in China. Back in the early 2000s, the "China miracle" was all the rage among investors. Editors of financial newsletters that focused on China attracted audiences of thousands at retail investor conferences like the MoneyShow. Hundreds of others took cruises to China to witness Shanghai's modern skyline in person. Americans would make millions in China. Even Warren Buffett entered the fray, buying $488 million worth of PetroChina (NYSE: PTR) stock in 2002. The stock went on to become the world's first trillion-dollar company. By the time the China mania was peaking around 2007, I knew how the movie would end. I worked as a mutual fund manager in London in the 1990s (during the emerging market and dot-com bubbles), so I'd witnessed my share of investment manias. Since the early 2000s, every last one of the "China miracle" newsletters has folded. Hundreds of unsuspecting U.S. investors were ripped off by small Chinese companies that listed in the U.S., as told in the documentary The China Hustle. It seems only the Oracle of Omaha emerged unscathed. Buffett sold his stake in PetroChina for a $3.5 billion profit before the Chinese market's collapse. (Today, the company is worth $124 billion - down about 87% from its peak valuation.) Back in the News After fading from investor consciousness for a while, China is back in the news. That's because its government recently forced DiDi (NYSE: DIDI) - China's biggest ride-hailing service - to be removed from Chinese app stores, just days after its listing on the New York Stock Exchange earlier this month. More recently, Chinese regulators cracked down on education companies, effectively banning them from raising money from stock listings. Chinese stocks promptly crashed. Just last night, regulators in Beijing held a call with global investors, including executives from BlackRock (NYSE: BLK), Fidelity, Goldman Sachs (NYSE: GS) and JPMorgan (NYSE: JPM). The Chinese were surprised by the investor backlash. Chinese regulators were keen to send the message that it was business as usual. Still, the meeting did little to assuage investors' concerns about future policies. As one attendee observed, it was clear there will be more to come. The lesson for investors is clear as day... In this homegrown version of regulatory roulette, China can crush any public company at will. The Myth of Chinese Capitalism The recent actions of the Chinese government should remind investors of one crucial but overlooked fact: China is not a capitalist country. China is governed by the Communist Party of China (CPC). And the CPC extends its tentacles into all facets of business. Every Chinese joint venture has a CPC representative in senior management. Most Chinese CEOs are members of the CPC. Their ranks include tech icons like Alibaba (NYSE: BABA) founder Jack Ma. Every CEO of a Chinese company has a red phone on his desk, linking him directly to the CPC. The CPC also plays by a different set of rules than the rest of the world... Even as the world called "foul" when the U.S. banned Huawei Technologies from the American market, it cared little when China's government systematically banned U.S. internet giants like Alphabet (Nasdaq: GOOGL), Facebook (Nasdaq: FB), Amazon (Nasdaq: AMZN), Twitter (NYSE: TWTR) and eBay (Nasdaq: EBAY). This double standard is typical of communist regimes. Meanwhile, CPC leaders are laughing all the way to the bank at the West's collective naïveté. | 
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