China has unveiled sweeping new regulations that significantly expand state control over overseas investments, technology transfers and cross-border business activities involving Chinese entities.
The new rules, issued by the State Council of China, will take effect on 1 July and establish a formal legal framework allowing Beijing to review, restrict or even reverse completed overseas transactions.
The move comes just weeks after Chinese authorities ordered Meta to unwind its acquisition of AI startup Manus, citing violations of outbound investment regulations.
For the first time, Chinese authorities have established a comprehensive legal basis to force the unwinding of completed overseas transactions that are deemed to affect national security.
The regulations require government authorisation for exports of restricted Chinese goods, technologies, services and related data.
They also empower authorities to conduct national security reviews of overseas investments and asset transfers, order divestments, halt investments and impose penalties for non-compliance.
Analysts say the measures significantly increase regulatory risks for investors operating in sensitive sectors such as artificial intelligence, advanced technology and strategic industries.
Beijing increasingly views artificial intelligence as a sector directly linked to national security and technological competition.
The regulations specifically prohibit unauthorised cross-border transfers of talent, expertise, technology and intellectual property.
The measures appear aimed at practices sometimes used by Chinese technology firms to relocate operations, employees and intellectual property overseas before seeking foreign investment or acquisitions.
The rules state that investors cannot transfer restricted technology or related data through overseas staffing arrangements, technical guidance, training programmes or personnel deployments without official approval.
The regulations could affect Chinese firms seeking to move capital and operations abroad to access international investors or escape intense domestic competition.
They are also seen as targeting so-called 'Singapore-washing' strategies, where Chinese companies relocate personnel and operations to jurisdictions such as Singapore before attracting foreign investment.
The Manus case has become a prominent example of Beijing's growing concern over the movement of Chinese technology, talent and intellectual property overseas.
The rules also grant Beijing broad powers to retaliate against foreign governments that restrict Chinese investment.
Under the framework, China could block acquisitions or investments involving foreign companies if their home countries impose sanctions or investment restrictions on Chinese firms.
For example, if a foreign government places a Chinese technology company on a sanctions list, Beijing could respond by restricting unrelated transactions involving companies from that country.
The regulations follow new supply-chain security measures introduced earlier this year, which expanded Beijing's powers over foreign companies operating in China.
Those measures included provisions allowing authorities to impose exit bans on employees of foreign firms accused of helping enforce foreign sanctions against China.
Taken together, analysts say the new rules form part of Beijing's broader effort to strengthen control over critical technologies, supply chains, strategic industries and outbound investment flows while reducing vulnerability to Western pressure.
(with inputs from Reuters)