China imposes ‘national security’ rules on foreign investment, including offshore technology transfers | Today’s news
China is stepping up its scrutiny of overseas investment, with broad “national security” regulations coming into effect from Wednesday. According to the State Council’s 34-Article Regulation on Overseas Investment, it authorizes “necessary and defensive measures” to protect Chinese investors and interests overseas in response to obstacles related to foreign trade.
Outbound Direct Investment Regulation
Under the new rules, originally announced on June 1, the government will examine trade barriers to investment by foreign countries and coordinate retaliatory responses. Officials called the law “a milestone in the history of the development of China’s outbound investment.”
Beijing’s new law, also known as the 2026 Regulation on Outbound Direct Investment (ODI), requires Chinese investors to cooperate with authorities during any overseas investigation, the South China Morning Post reported.
Beijing regards fields such as artificial intelligence, computer chips and green technologies as economically and strategically vital and has pledged to support their domestic development.
Increase the quality and level of external investment
The new measures are to “raise the quality and level of foreign investment,” according to the State Council, China’s cabinet.
But some investors fear it will limit access to global markets for China’s bustling and sprawling tech ecosystem.
Outbound investment should be guided by an “overall national security concept”, the regulations state, while aiming to “balance domestic and international considerations”.
The new framework also empowers the government to conduct reviews of investments or transfers that could affect national security.
Beijing often views cross-border transactions with suspicion, with its top economic planning body in April quashing an attempt by Facebook owner Meta to acquire AI startup Manus, which was created by a company founded in China but now based in Singapore.
Read also | Meta is preparing to have to cancel its acquisition of Manus after the China ban
Under the new rules, existing restrictions on cross-border transfers will be extended beyond goods and data to include the export of services, by sending technical experts abroad or conducting training overseas.
The US-China Economic and Security Review Commission said on social media this week that the move reinforces a trend it has been tracking for months.
The bipartisan commission warned in May that “as is often the case with China’s national security laws, law enforcement agencies have enormous discretion in deciding what constitutes a violation, creating an additional risk for foreign firms.”
China puts Japanese entities on control list
In a related development, China’s Ministry of Commerce on Monday placed 20 Japanese entities, including several divisions of Mitsubishi Corporation, on a control list that bans Chinese and foreign exporters from selling them dual-use goods made in China. Dual-use items can be used for both civilian and military purposes.
In addition, 20 more entities have been added to the dual-use watch list, according to the ministry. It includes Mitsui E&S, which makes engines and other equipment for ships, as well as divisions of Fujitsu and Komatsu corporations, the Associated Press reported.
Read also | China has banned Meta’s acquisition of Manus for national security reasons
Chinese companies exporting to these firms will be required to apply for special licenses, submit risk assessment reports to Japanese companies and undertake in writing that the dual-use items will not be used for military purposes.
China imposes export controls on 10 US companies
Last week, in response to Washington’s blacklist, China also imposed export controls on 10 U.S. companies involved in defense and rare earth mining and banned public procurement from dozens of other firms.
The move was “in response to the U.S. government’s heinous act of adding it to its so-called ‘Chinese military enterprise list,'” the Commerce Department said in a statement, adding that the move was also to “ensure national security.”
