China is tightening scrutiny of outbound capital flows after forcing the unwinding of the Meta-Manus deal, as authorities seek to safeguard the economy amid heightened technology rivalry with the U.S.
The State Council, China’s cabinet, said Monday that the government will prohibit the unauthorized export or use of state-restricted goods, technology, services and data, according to rules approved in April.
Effective in July, the rules also ban indirect transfers of restricted technology and data through cross-border personnel deployments, training programs or technical guidance. Unauthorized outbound investment activities will be subject to penalties, including fines and investment bans, according to the State Council.
For unapproved investments that have already been made, authorities may order entities to halt investment activities and divest related shares and assets within a specified period.
Monday’s announcement comes a month after China blocked Meta Platforms’ acquisition of artificial-intelligence startup Manus on national-security grounds and ordered the $2.5 billion deal to be unwound.
Founded in China in 2022, Manus later moved its global operations and staff to Singapore after receiving funding from U.S. venture-capital firms. Following Meta’s acquisition of the startup in late December, Chinese authorities launched a regulatory review in January, saying cross-border acquisitions and technology exports must comply with Chinese law.
Analysts said the April decision highlighted Beijing’s determination to shield its technology sector from foreign influence and protect critical intellectual property. As U.S.-China technology competition intensifies, both countries have tightened export controls, restricted talent exchanges and increased scrutiny of cross-border capital flows.
Even before Monday’s announcement, Chinese regulators had instructed several leading domestic AI companies not to accept U.S. funding without government approval, The Wall Street Journal previously reported.
Beijing on Monday also outlined broad countermeasures against foreign entities it deems harmful to Chinese interests or disruptive to Chinese investment.
Authorities may prohibit offending foreign entities from participating in China-related trade and investment activities. They may also deny visas, revoke residency permits and bar entry for related personnel, according to the rules released Monday.
