China expands curbs on foreign deals, tech transfer after Meta-Manus block

China has implemented sweeping new regulations aimed at tightening its control over overseas deals involving Chinese investors, technology, data, and national security. The rules, published by the State Council and effective July 1, establish a comprehensive legal framework to influence transactions in markets beyond mainland China, including Taiwan.

These regulations grant Beijing the power to punish foreign firms whose home countries restrict Chinese investment. They also provide a formal legal basis for China to compel the unwinding of completed overseas transactions, thereby increasing compliance risks for global investors in sensitive sectors like Chinese technology and artificial intelligence.

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The real story is how it ​codifies a full retaliatory toolkit against US entities that participate in outbound investment screening of Chinese capital.

Authorities previously cited unspecified foreign investment law violations in ordering Meta to unwind its acquisition of AI startup Manus. Beijing views AI as critical to national security and has been working to control the outbound flow of technology, intellectual property, and talent. The new framework specifically prohibits cross-border talent transfers in sensitive sectors without approval, a practice sometimes referred to as "Singapore-washing."

Analysts note that the rules are largely designed to prevent Chinese firms from divesting strategic assets rather than acquiring them. Han Shen Lin, China country director at The Asia Group, stated that the regulations "codify a full retaliatory toolkit against US entities that participate in outbound investment screening of Chinese capital." The rules consolidate existing frameworks and require authorization for exports of restricted Chinese goods, technologies, services, or related data.

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The new rules are "largely designed to prevent Chinese firms from divesting strategic assets to foreign ⁠parties, not to stop them from acquiring them in the first place".