context: Premier Li Qiang signed the 'Regulations of the State Council on outbound investment', establishing an outbound investment security review system and classified/tiered whole-process supervision that divides outbound investment into encouraged, restricted and prohibited categories by country-risk grade. The regulation closes a legal loop left open: when the National Development and Reform Commission blocked Meta's acquisition of Manus in April it cited no explicit legal basis, and on 22 May it publicly denied rumours of 'requiring tech firms to refuse US capital' while keeping the 'national security' red line; the regulation now formally institutionalises outbound investment security review. The direction governs not foreign capital entering the PRC but the PRC's capital, technology and talent going out, aiming to 'shore up the foundation' and prevent leakage of advantage industries.
Caixin interviewed lawyers and experts on the new issued 'Regulations of the State Council on outbound investment', suggesting advantage industries (AI, new energy vehicles, rare earths, biopharma) may become regulatory priorities, with explicit targeting of circumvention tactics such as the 'Singapore Wash' and technology offshoring.
Caixin highlighted
- individual investors' outbound investment and reinvestment are also brought into scope
- specific industry breakdown of encouraged/restricted/prohibited categories is not yet specified
- definition of investment geographies awaits refinement
- regulation provides a legal basis for recent investment cases (such as the Manus case)
Yu Zhiguo 于治国 Zhonglun Law Firm partner, on the regulation
- the regulation explicitly defines the 'outbound investment security review system'
- already included in the 2026 national legislative plan, with multiple Ministry of Justice drafting and consultation rounds: not case-driven; applicable to Meta's Manus acquisition, Wingtech's acquisition of Nexperia (Netherlands) and rare-earth technology
- the Manus ruling cited no explicit legal basis, which may include the Foreign Trade Law
- the PRC’s industrial scope is broader than the US's
- the US covers only microelectronics and semiconductors, AI and quantum computing
- the PRC sets no fixed range and keeps a flexible adjustable list
- export-controlled technologies and data covered by the Data Security Law and Personal Information Protection Law may all become focus areas
Dai Menghao 戴梦皓 King & Wood Mallesons partner, on the regulation
- regulatory priorities
- advantage industries such as AI, new energy vehicles and rare earths
- 'shore up the foundation', preventing competitiveness loss from advantage industries and production lines moving offshore
- 'risk country' definitions will become more refined (previously limited to non-diplomatic-relations states and Iran)
- Article 13 targets disguised transfer of controlled technology via 'non-direct investment' (overseas company formation, personnel sent abroad for technical assistance), as in the Manus case
- Article 15 applies to the 'Singapore Wash'
- registering PRC firms in Singapore to transfer technology, assets and talent
- moving rare-earth production lines offshore to evade export controls
- PRC–US difference
- the US aims to 'cut off capital' (only two options, prohibit or file; simple)
- the PRC aims to 'prevent loss of advantage industries' via case-by-case comprehensive review
- countermeasures: the security review mechanism
- invoking to reject EU/US foreign subsidies regulation probes and forced technology-transfer or joint-venture demands, and bar firms from complying with extraterritorial jurisdiction
- provides legal grounds and deterrence against extreme measures such as India's forced nationalisation of SAIC assets
Bo Zhengyuan 薄正源 Plenum Research partner, on the regulation
- biopharma may become a focus area (Chinese innovative-drug overseas expansion has surged since 2025)
- the regulation is not yet detailed and retains considerable flexibility; if fully implemented, the PRC's outbound investment control system could be more granular than the US's