China tightens overseas investment rules after blocking Meta-Manus deal

China’s State Council announced sweeping new rules on July 1 to tighten control over overseas investments involving Chinese technology, data, and national security. The regulations mandate authorization for exporting restricted goods, technologies, services, or related data, directly addressing the Meta-Manus deal, which Beijing previously blocked for violating unspecified outbound investment laws. The rules explicitly prohibit cross-border talent transfers in sensitive sectors without approval, targeting practices like 'Singapore-washing,' where companies relocate employees and operations abroad to attract foreign investment. Manus, the AI startup acquired by Meta, had shifted operations to Singapore before the deal, prompting Beijing’s intervention. The new measures also empower the State Council to review overseas investments for national security risks, order investors to dispose of shares, or cease investments entirely. Non-compliance may result in fines, while foreign entities trading with China could face bans if their home countries impose sanctions on Chinese firms. China views AI as a critical sector for national security and has sought to control outbound flows of technology, intellectual property, and talent. The regulations provide a formal legal basis for unwinding completed overseas transactions, increasing compliance risks for global investors in sensitive sectors like Chinese tech and AI. The rules follow two earlier supply chain security decrees in April, which granted Beijing power to block employees of foreign companies enforcing sanctions against China. Analysts suggest these measures are part of China’s effort to counter Western sanctions and strengthen its dominance in global supply chains and self-reliance in critical sectors.