Following Manus Controversy, China Issues New Strict Regulations on Outbound Investment to Prevent Tech Leaks

CNA, Taipei, June 1: The Chinese State Council announced today the "Regulations on Outbound Investment," which were passed on April 17 and will take effect on July 1. The regulations stipulate that investors may not export or use goods, technology, services, or related data that are restricted or prohibited from export by the state without official permission. Furthermore, the cross-border dispatch of technical personnel to provide technical guidance in other countries is prohibited. This is widely viewed as a tightening of outbound investment reviews to prevent technology leaks.

In April this year, U.S. tech giant Meta planned to acquire the AI startup Manus, but the deal was blocked by China's National Development and Reform Commission (NDRC). Prior to this, the two Chinese founders of Manus, Xiao Hong and Ji Yichao, were ordered by the NDRC to attend meetings and were subsequently prohibited from leaving China, drawing significant attention from the global business and technology communities.

According to the Chinese government's official announcement, as well as reports from Reuters and The Wall Street Journal, the "Regulations on Outbound Investment" consist of 34 articles, with Article 13 receiving the most attention.

The article stipulates that when investors engage in outbound investment, they must not export or use goods, technology, services, or related data that are prohibited from export by the state, nor may they export or use restricted items without permission.

Furthermore, investors are prohibited from transferring prohibited or restricted goods, technology, services, or data to other countries through methods such as cross-border dispatch of technical personnel, organizing personnel to work in other countries, providing cross-border technical guidance, or arranging cross-border training.

Article 14 also stipulates that outbound investments involving capital exchange, import/export of goods and technology, cross-border service trade, cross-border data flow, entry/exit management, merger control, export control, cybersecurity, tax administration, and state-owned asset supervision must be conducted in accordance with relevant laws, administrative regulations, and state provisions.

Article 15 states that to improve the security review system for overseas investment, the investment and commerce departments of the State Council, in conjunction with other relevant departments, will conduct security reviews of overseas investments that "affect or may affect national security," as well as the transfer or disposal of related assets and rights. Relevant organizations and individuals must assist and cooperate, and must not refuse or obstruct the process, and must comply with the security review decisions.