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 US consultancy.
“The real story is how it codifies a full retaliatory toolkit against US entities that participate in outbound investment screening of Chinese capital.”
One of the most significant articles requires authorisation for exports of restricted Chinese goods, technologies, services or related data.
Lin said the regulations mirror and consolidate existing regulatory frameworks issued by separate Chinese ministries in the past.
CROSS-BORDER TALENT TRANSFERS
The new framework specifically bans cross-border talent transfers in sensitive sectors without approval, targeting the kinds of moves Manus made when it shifted employees and operations to Singapore before the Meta acquisition – a practice commonly known as “Singapore-washing”.
They could affect Chinese firms wishing to move capital and operations abroad to attract investment in more liquid overseas capital markets and to escape intense domestic competition.
Investors “shall not transfer goods, technologies, services and related data that are prohibited from export… by means of sending technical personnel across borders, organising personnel to work in other countries (regions), providing technical guidance across borders, or arranging cross-border training”.
They also give the State Council authority to conduct security reviews of overseas investments or asset transfers that may affect national security, order investors to dispose of shares or cease investment, and impose fines for non-compliance on individual investors.
“It is becoming increasingly difficult for Chinese investors to invest abroad independently of state oversight,” wrote Henry Gao, a law professor at Singapore Management University, on X.
“The move also suggests growing concern in Beijing over capital outflows and pressure on China’s foreign exchange reserves.”
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