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China’s determination to stamp out Covid-19 outbreaks with lockdowns and other restrictions has been a major drag on its economic growth. Concerns about what Beijing might attempt to do with Taiwan, a democratically self-ruled island, also increased after the Chinese Communist Party recently amended its charter to include the phrase “firmly oppose Taiwan independence” and elevated a military commander familiar with Taiwan.

Tiger had been shrinking its exposure to Chinese equities, concentrating on a smaller set of companies it knew well and believed in, said people familiar with the move. High valuations in early 2021 also played a role, one of the people said.

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Tiger further shrank its hedge fund’s China exposure to the mid-single digits heading into the congress, some of the people said, avoiding some of the carnage that hit Chinese equities as a result of it. The Hang Seng Index in Hong Kong fell 6.4% on 24 October, the biggest one-day decline since the 2008 global financial crisis.

Chinese companies’ American depositary receipts plunged, with the five biggest US-listed Chinese companies as of 21 October losing $52.17bn in market value in one day.

Tiger refrained from buying into the steep selloff, with executives telling clients they are spending more time on opportunities in India and the South Pacific.

Investors have been scaling back their China exposure as a series of regulatory crackdowns on internet-platform companies and for-profit education businesses inflicted heavy losses on many funds and highlighted the perils of investing in an authoritarian state. But the recent congress has caused even longtime China bulls to rethink their exposure.

Tiger wants more clarity about issues such as how vigorously China will pursue growth and whether the country will invade Taiwan before investing fresh dollars in Chinese equities, said people familiar with the firm. Some could come from the Politburo central committee economic work conference in December, which sets the tone for the coming year’s economic agenda and usually is chaired by Xi.

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Coleman and others also have said Xi would have to stimulate the economy to some degree, said people familiar with the conversations.

An early believer in China, Tiger made billions by investing in China-focused versions of US internet companies, helping to make its reputation as a savvy tech investor. It invested in three publicly traded China internet companies in 2002 and closed its first private equity fund, a $75.8m vehicle, in 2004. One of that fund’s first investments was in Alibaba, which went public in 2014 in a blockbuster New York IPO.

The firm’s most successful bet in China was a $200m investment in e-commerce giant JD.com, which returned $5bn. Tiger also was an early investor in Didi and artificial-intelligence company SenseTime, and had exited both companies not long after the IPO lockup periods ended, according to people familiar with the investments.

Losing bets include those in apartment provider Danke Apartment and tutoring company Zuoyebang, according to a recent Tiger document.

Tiger still retains significant exposure to China through several private equity funds, said people familiar with the firm, but has dramatically slowed down in making new investments in private companies since Beijing intensified its regulatory crackdown on internet platforms last summer. Its biggest private investments in China are TikTok parent Bytedance and fast-fashion retailer Shein.

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Tiger’s hedge fund has been one of the worst performers in the industry recently, erasing years of gains in months and prompting the firm to cut fees earlier this year. The hedge fund lost 7% last year and has retreated 52% this year through September. Its long-only fund has fared worse. Tiger’s Chinese equities exposure has contributed to the losses, said people familiar with the firm, though to a lesser extent percentage-wise than the rest of the portfolios. Tiger managed roughly $60bn firmwide as of 30 September.

Tiger was a net seller of Chinese equities for the year ended 30 June, one of the people said, but Tiger also bought Chinese equities as the market was falling, a buy-the-dip strategy that previously had proved profitable. Tiger partner Edward Lei, who focused on Tiger’s public investments in China for almost a decade, left in June and is trying to raise money for his own global hedge fund.

Some of the people familiar with Tiger said JD.com and food-delivery company Meituan comprise the bulk of Tiger’s remaining exposure to China in its hedge fund.

—Eliot Brown contributed to this article.

Write to Juliet Chung at Juliet.Chung@wsj.com and Jing Yang at jing.yang@wsj.com

This article was published by The Wall Street Journal, a fellow Dow Jones Group title