China tightens grip on overseas tech deals, AI talent transfers

China has introduced sweeping new regulations tightening oversight of overseas transactions involving Chinese investors, technology, data, and national security, in a move that significantly expands Beijing’s control over cross-border economic activity.

The rules, published by the State Council, or cabinet, aim to extend China’s regulatory reach into foreign markets, including Taiwan, and give authorities new powers to penalize foreign companies whose home countries restrict Chinese investment, Reuters reports.

The framework, which takes effect on July 1, establishes a comprehensive legal basis for Beijing to force the unwinding of completed overseas transactions, raising compliance risks for global investors operating in sensitive sectors such as Chinese technology and artificial intelligence.

The new measures follow reports that Beijing previously ordered Meta to unwind its acquisition of AI startup Manus, which Chinese authorities said violated unspecified foreign investment laws. Analysts said the move discouraged stake transfers by domestic companies to foreign investors without official approval.

China has increasingly treated artificial intelligence as a strategically sensitive sector linked to national security, tightening control over the outbound flow of technology, intellectual property, and talent.

According to Han Shen Lin, China country director at The Asia Group, a US consultancy, the regulations 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.”

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

One of the most significant provisions requires authorisation for the export of restricted Chinese goods, technologies, services, or related data.

Lin said the rules consolidate and mirror existing frameworks previously issued by separate Chinese ministries.

The new regulations also explicitly ban cross-border transfers of talent in sensitive sectors without approval, targeting practices such as those used in the Manus case, where employees and operations were relocated to Singapore ahead of the acquisition — a practice commonly referred to as “Singapore-washing.”

They also warn that investors “shall not transfer goods, technologies, services and related data that are prohibited from export... by means of sending technical personnel across borders, organising personnel to work in other countries (regions), providing technical guidance across borders, or arranging cross-border training.”

The measures could also affect Chinese firms seeking to move capital and operations abroad to attract foreign investment and access more liquid overseas capital markets, as well as to mitigate intense domestic competition.

The State Council is also granted authority to conduct national security reviews of overseas investments or asset transfers, order investors to dispose of shares or halt transactions, and impose fines for non-compliance.

“It is becoming increasingly difficult for Chinese investors to invest abroad independently of state oversight,” wrote Henry Gao, a law professor at Singapore Management University, on X.

“The move also suggests growing concern in Beijing over capital outflows and pressure on China’s foreign exchange reserves.”

The regulations further empower Beijing to restrict foreign entities from trading with or investing in China and to revoke work or entry visas for foreign employees if their home countries impose restrictions on Chinese investment. For instance, if the United States places a Chinese technology company on a sanctions list, China could retaliate by blocking unrelated US acquisitions involving Chinese-linked entities.

The rules do not specify which transactions would be barred on national security grounds and apply to investments in Hong Kong, Macau, and Taiwan.

Many Chinese technology companies have increasingly listed in Hong Kong in recent years amid geopolitical tensions with the United States, while Taiwan remains a democratically governed island claimed by China as its own territory.

“Their explicit inclusion under this framework is a quiet but significant sovereignty signal,” said Lin.

The new regulations follow two supply chain security decrees issued in April, which give Beijing the authority to impose exit bans on employees of foreign firms involved in enforcing sanctions against China.

Unlike legislation debated in China’s parliament, those measures were introduced without prior warning and took immediate effect, raising concerns among foreign businesses operating in China.

Analysts say the moves reflect China’s broader strategy to expand its export control regime, counter Western sanctions, strengthen dominance in global supply chains, and advance domestic self-reliance in critical technologies.

China last week also announced a crackdown on cross-border investment, stating it would punish three online brokers accused of illegally transferring funds to foreign markets.

By Vafa Guliyeva