Beijing’s power to reverse overseas tech deals unnerves foreign investors

China has unveiled sweeping new rules to tighten state control over cross-border technology deals, giving Beijing broader authority to scrutinise overseas investments involving Chinese investors, strategic technology, data and national security.

The regulations, announced by the State Council, will take effect on July 1, 2026.

They require companies to seek official approval before exporting restricted goods, technologies, services or related data.

The rules also create a legal basis for authorities to unwind foreign transactions even after they have been completed, if they are deemed to pose national security risks.

The move comes about a month after Beijing ordered Meta to reverse its acquisition of Manus, a Chinese-founded artificial intelligence start-up that had shifted operations to Singapore.

Chinese authorities viewed the deal as a breach of outbound investment rules, with analysts seeing the case as a clear warning to domestic technology firms against transferring shares or strategic assets to foreign investors without state approval.

AI has become a particularly sensitive sector for China, which regards the industry as closely tied to national security.

Beijing is seeking to prevent key technology, intellectual property and skilled personnel from flowing out of the country as competition with the United States and other Western economies intensifies.

The new framework also closes a loophole linked to the relocation of operations overseas.

It bars companies in sensitive industries from transferring technical staff across borders without approval, including sending employees to work abroad, providing cross-border technical advice or arranging training that could amount to technology transfer.

The measure appears aimed at strategies such as so-called “Singapore-washing”, a practice in which China-linked firms move operations or staff to Singapore before pursuing foreign investment or acquisition.

Manus had reportedly used this route before Meta moved to acquire the company.

Under the new rules, China’s cabinet can conduct national security reviews of overseas investment and cross-border asset transfers.

Authorities will also be able to order investors to divest shares, suspend investment activity or impose fines if companies are found to have violated the regulations.

The regulations further give Beijing room to retaliate against foreign restrictions on Chinese investment.

If another country limits investment from China, Beijing could block companies from that country from trading with China or acquiring China-linked assets, even if the specific deal is not directly connected to the original foreign restriction.

The latest rules follow two supply-chain security decrees introduced in April, which gave authorities power to impose exit bans on employees of foreign companies if they were found to be involved in sanctions against China.

Those measures, introduced without prior warning, had already raised concern among foreign investors.

Analysts view the latest technology-control rules as part of Beijing’s broader effort to build legal tools that can both protect strategic industries and serve as a counterweight to Western sanctions.

The policy direction also reflects China’s push to strengthen self-reliance in sensitive sectors, especially artificial intelligence, while maintaining tighter control over global technology and supply chains.