Beijing Introduces New Regulations To Control Foreign Deals

With these new regulations, the Chinese administration will make it difficult for those companies whose home countries are seeking to restrict investments from Beijing.

In an attempt to tighten control over foreign deals, China has introduced several new rules pertaining to Chinese investors, technology, data and national security. These rules were published by the cabinet, otherwise known as the State Council, and aim to influence not only mainland China but also Taiwan.

With these new regulations, the Chinese administration will make it difficult for those companies whose home countries are seeking to restrict investments from Beijing. These rules will come into effect on July 1, and the regulatory framework is a comprehensive and formalised legal basis for China to force completed foreign transactions to unwind. This runs compliance risks for overseas investors, particularly in sensitive and emerging sectors such as Chinese tech and AI.

This move was prompted by China’s decision to order the US-based Meta to unwind its $2 billion-plus acquisition of AI startup Manus last month. Beijing authorities said that the government would tighten scrutiny of American investments in domestic startups developing frontier technologies, given the present fragile relationship between the US and China.

With the White House limiting China’s access to advanced US chips, the National Development and Reform Commission has retaliated by stopping US firms from acquiring Chinese AI talent and intellectual property.

Beijing officials said that the Meta-Manus deal violated unspecified foreign investment laws, which have prevented the transfer of stakes from domestic companies to foreign investors without the Chinese government’s approval. Countries around the world have classified AI as a critical sector for national security, and efforts are being made, particularly by the Trump administration and Xi Jinping’s government, to curb the flow of technology, intellectual property and talent abroad.

While foreign companies can still invest in and acquire Chinese companies, the new regulations merely limit Beijing-based firms from divesting strategic assets to foreign ⁠parties. Many are already calling these regulations a toolkit for retaliation against American entities that screen outbound investments from China.

However, experts are also pointing out that these new rules are merely a consolidation of the previously issued frameworks by separate Chinese ministries. One of the most significant articles in the new framework is that exports of restricted Chinese goods, technologies, ​services or related data now require proper authorisation.

There is a new addition to the framework which prevents cross-border talent transfers in sensitive sectors without approval. This clause was again prompted by Manus’ decision to shift employees and operations to Singapore before the Meta acquisition. This practice is commonly known as ‘Singapore-washing.’ As Sino-US tensions rise and with the unpredictability of Trump tariffs, many Chinese companies are moving their base to Singapore.

Companies believe that risks of their operations being disrupted by the big power tensions will reduce if their headquarters shifts to a more trade-focused country like the island-state. Singapore-washing has been going on since the end of the first Trump Presidency, and has since spread to various sectors ranging from critical minerals to tech and biotechnology.

The new rules come after the State Council approved two new supply chain security ordinances in April that give Beijing the authority to keep foreign workers from leaving businesses that are imposing penalties on China. The international business community in China was alarmed by the sudden and swift implementation of the regulations, in contrast to new legislation authorised by the government.

Beijing is strengthening its legal toolkit for export control in order to avoid Western sanctions, maintain its leading position in global supply chains, and increase domestic self-sufficiency in critical commodities and sensitive fields like technology. Last week, the government also declared that it would penalise three online brokers for allegedly transferring money illegally to foreign markets and pledged a significant crackdown on cross-border investing.

These new regulations are China’s way to combat scrutiny from the US and other Western nations. While it has already blocked the Meta-Manus takeover, the implications of these new rules on Chinese companies and the business sector remain to be seen.