China on June 2 announced a new set of regulations to tighten control over overseas deals related to investors, technology, data and national security of this country, just one month after Beijing asked Meta to cancel the acquisition of artificial intelligence startup Manus.
Regulations announced by the State Council of China will take effect from July 1. The new legal framework creates an official and comprehensive basis for China to request the cancellation of completed foreign transactions if they are considered to violate regulations or affect national interests.
According to the published content, the regulations not only affect mainland China but also aim for transactions in other markets, including Taiwan (China). Beijing is also empowered to apply sanctions against foreign businesses from countries that restrict Chinese investment.
This move is said to increase the risk of compliance for global investors in sensitive areas such as Chinese technology and artificial intelligence.
Previously, Chinese officials said that the Meta - Manus deal violated foreign investment regulations, although they did not specify details. According to analysts, the incident sends a signal that does not encourage Chinese companies to transfer shares to foreign investors without Beijing's approval.
China considers artificial intelligence to be a sensitive area, of great significance to national security. The country's government has recently strengthened control over the flow of technology, intellectual property and human resources abroad.
One of the most notable clauses requires licensing when exporting goods, technologies, services or related data that are subject to restrictions.
The new framework also prohibits cross-border human resource transfers in sensitive areas if not approved. This regulation is said to be aimed at the model that Manus used to apply when transferring personnel and operations to Singapore before the deal with Meta.
The new clauses clearly state that investors are not allowed to transfer goods, technologies, services or data banned from export through sending technical experts abroad, organizing work in other countries, providing cross-border technical guidance or arranging international training programs.
The State Council of China is also empowered to conduct security reviews of investments or transfers of assets abroad that may affect national security. This agency may require investors to divest capital, terminate investment activities and impose penalties on individuals who do not comply with regulations.
