Chinese stocks have been under pressure, first due to the regulatory crackdown on the edtech sector, followed by antitrust regulators ordering Tencent to end its monopoly on music streaming and food delivery companies like Meituan to increase wages and benefits for their drivers. Then, Tencent had to suspend new account registrations for its flagship WeChat app for a security update.

The flood of bad news caused Class A shares to fall more than -6% at the start of last week. Domestic investors have shifted from believing that regulators were targeting only a few large companies to worrying that no sector is safe and that the damage could be long-lasting. These investors had become complacent in their view of regulatory risk; however, lawmakers dislike domestic market volatility and have moved to calm jitters. A commentary in the state-run Shanghai Securities News stated that the sharp drop in prices would not continue and that “the decline brings opportunities.” It then reinforced the message with the directive, “Don’t panic!” noting that domestic mutual funds had more than RMB850bn available to buy A-shares.

Behind the scenes, regulators reached out to financial institutions to offer assurances about the policy.These moves have stabilized the markets as the days have gone by, with internet stocks and capital inflows rebounding, but for this calm to last, the pace of destabilizing regulatory actions must slow.

There are good reasons for lawmakers to remain calm.China’s securities regulators have two main functions: (i) to nurture the capital markets so that companies in favored sectors can raise funds, and (ii) to prevent destabilizing volatility, especially downward volatility. The crackdown on internet companies aligns with the first objective.Rather than viewing the internet sector as a national vanguard of innovation, policymakers increasingly see it as a source of social problems and security risks. Encouraging capital markets to invest less in consumer internet services and more in high-tech manufacturing reflects the government’s long-term goals.But if the domestic stock market crashes because investors fear the government is punishing companies indiscriminately, fundraising across all sectors is threatened.

China’s policymakers know that domestic capital markets must develop if the country is to achieve its long-term policy goals.After all, achieving global technological leadership and managing competition with the U.S. will be a costly endeavor. They may be willing to restrict companies’ access to global capital (stricter rules have halted Chinese stock offerings in New York), but this makes the domestic and Hong Kong markets even more important.

For all these reasons, both the intensity and the tone of the recent regulatory crackdown are likely to ease.That does not mean the campaign to comprehensively regulate Internet platforms will be abandoned, as it remains a high-level political priority. There is no going back to the unchecked expansion of past years.But the regulatory storm may subside to a more manageable level, which—given the attractive valuations of Chinese tech companies—could well present buying opportunities for investors with a higher tolerance for risk and volatility.