China issued sweeping new rules on Monday tightening control of overseas deals that involve Chinese investors, technology, data and national security, a month after Beijing ordered Meta to unwind its acquisition of AI startup Manus. According to reports from Reuters, the regulations, published by the State Council, seek to influence deals in markets beyond mainland China, including Taiwan, and give Beijing the power to punish foreign firms whose home countries restrict Chinese investment. The framework, which takes effect June 1, provides a comprehensive and formalised legal basis for China to force the unwinding of completed overseas transactions, heightening compliance risks for global investors in sensitive sectors like Chinese tech and AI. 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," said Han Shen Lin, China country director at The Asia Group, a U.S. consultancy. As reported by Reuters, "The real story is how it codifies a full retaliatory toolkit against U.S. entities that participate in outbound investment screening of Chinese capital."
Chinese authorities previously said the Meta-Manus deal violated unspecified foreign investment laws, which analysts said discouraged stake transfers by homegrown companies to foreign investors without Beijing's approval. As reported by Reuters, Beijing views AI as a sensitive sector critical to national security and has made efforts to control outbound flows of technology, intellectual property and talent. 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," said Han Shen Lin, China country director at The Asia Group, a U.S. consultancy. The regulations mirror and consolidate existing regulatory frameworks issued by separate Chinese ministries in the past, according to Lin. China is also restricting overseas travel for top AI professionals in private firms such as Alibaba Group and DeepSeek, as reported by Bloomberg.
Despite overall growth in Chinese overseas investment, the composition has shifted significantly toward more cautious and strategic approaches. According to NDTV Profit, Chinese companies invested over $174 billion abroad in 2025, up by 7%, but non-financial investments remained almost flat, indicating a focus on capital preservation over expansion. The data shows a 17% increase in non-financial investments in the Belt & Road Initiative (BRI) region, while investments in Western nations have declined due to tightened scrutiny and national security concerns. This shift reflects China's experience with developing countries in Southeast Asia, Latin America, and Africa, where it faces less resistance than in Western markets. The new framework specifically targets cross-border talent transfers in sensitive sectors without approval, affecting practices like "Singapore-washing" where companies relocate operations to avoid domestic competition.
China expanded its trade secret rules to include data and algorithms, marking the first time Chinese law protects such digital assets as proprietary secrets. According to China Central Television, the State Administration for Market Regulation released the Regulations on Trade Secret Protection effective Monday, representing the latest step to shield technologies seen as new pillars of the world's second-largest economy. The framework details strict security requirements for remote work and cross-border corporate collaborations, requiring companies to implement protective measures including limiting file access by employee rank, hiding sensitive details and tracking user activity. The People's Daily praised the measures for adapting to the digital era, noting that electronic intrusion and remote scraping now frequently threaten corporate secrets. Alongside the new rules, the market regulator launched a month-long enforcement campaign on Monday with focus on key sectors such as biomedicine, semiconductor and AI, vowing to crack down on "malicious poaching" and employees who change jobs while carrying trade secrets.
The rules give Beijing the power to ban foreign entities from trading with or investing in China, and even cancel their foreign employees' China work or entry visas if their home countries restrict Chinese investment. As reported by Reuters, if the U.S. government puts a Chinese tech firm on a sanctions list, Beijing can retaliate by blocking a U.S. firm's unrelated acquisition of a Chinese-linked entity. Henry Gao, a law professor at Singapore Management University, wrote that "it is becoming increasingly difficult for Chinese investors to invest abroad independently of state oversight." The move also suggests growing concern in Beijing over capital outflows and pressure on China's foreign exchange reserves. The rules apply to investments in Hong Kong, Macau and Taiwan, with analysts noting their explicit inclusion under this framework as a significant sovereignty signal.
