China Tightens Overseas Investment Rules, Expanding Controls on Technology and Capital

A China-based expert told The Epoch Times that he believes China’s ’reform and opening up' era has effectively reversed under Chinese leader Xi Jinping.

A Chinese bank employee counts 100-yuan notes and 100-U.S. dollar bills at a bank counter in Nantong, Jiangsu Province, China, on Aug. 6, 2019. STR/AFP via Getty Images

China has introduced new rules governing overseas investment that significantly expand restrictions on the transfer of capital, technology, data, and services abroad, reflecting Beijing’s growing emphasis on protecting the regime over cross-border economic activity, according to an expert.

The regulations, issued by China’s State Council and reported by state media outlet Xinhua News Agency on June 1, prohibit investors from transferring restricted technologies or data through overseas deployment of technical personnel, technical guidance, or training arrangements.

The inclusion of personnel movement and training in technology-transfer controls is a notable expansion of regulatory scope, effectively broadening what Beijing defines as sensitive outbound knowledge flows.

A China-based cryptocurrency industry insider, who spoke to The Epoch Times on the condition of anonymity out of fear of reprisal, said he believes that China’s “reform and opening up” era has effectively reversed under Chinese leader Xi Jinping.

Although the regime continues to promote China as open to foreign investment, the insider said growing restrictions on the movement of businesses, technology, and capital point in the opposite direction. He said that official concerns about data security increasingly serve to justify tighter political and economic controls.

“In the end, the priority is protecting the political system,” he said. “The regime appears willing to accept economic costs if it believes doing so reduces risks to its hold on power.”

Security and Development

The regulations state that China’s overseas investment policy should uphold both economic development and the country’s broader national security objectives while promoting an open global economy.

U.S.-based China current affairs commentator Wang He said this reflects what he sees as a fundamental tension in Beijing’s policymaking.

“The CCP understands that without integration into global markets, the economy would face serious difficulties,” he said. “At the same time, they want to maintain control over economic activity because greater market integration can reduce the Party’s ability to exercise control.”

Li Linyi, a current affairs commentator on China, told The Epoch Times that the regulations highlight what he described as a growing conflict between economic development goals and security priorities.

“This regulation is widely viewed as inward-looking, yet it simultaneously emphasizes openness,” Li said. “The desire to pursue both security and openness creates an inherent contradiction that reflects deep concerns about maintaining control.”

Wang said that Beijing is attempting to slow the movement of capital overseas, but he said the effort faces long-term challenges.

“As concerns about China’s economic outlook increase, fewer people want to keep their money in China,” Wang said. “If official channels become more restricted, unofficial channels will likely continue to develop.”

Technology Transfers Face Greater Scrutiny

Xu Zhen, a senior professional in China’s capital markets, told The Epoch Times the new rules may be linked to recent disputes involving Chinese artificial intelligence (AI) firms and foreign acquisition attempts.

In April 2026, China’s National Development and Reform Commission blocked a proposed $2 billion acquisition by Meta, the parent company of Facebook, targeting Chinese AI startup Manus, citing foreign investment rules. The company had relocated its headquarters and core team to Singapore in 2025, although parts of its product development remained in China.

Wang said the case reflects Beijing’s increasing reluctance to allow strategic technology assets—particularly in artificial intelligence—to fall under foreign control.

“China’s most sensitive technologies today are rare earth processing and artificial intelligence,” Wang told The Epoch Times. “The Chinese Communist Party (CCP) believes it has leverage in rare earths, while AI has become a direct arena of strategic rivalry.”

The rare-earth element and AI sectors are central to global supply chains and U.S.–China competition.

The new regulations also formally define investors to include not only companies and institutions, but also Chinese residents—an expansion that brings individual capital activity under the same regulatory umbrella.

The rules further state that overseas investments involving Hong Kong, Macau, and Taiwan will be subject to similar oversight, potentially limiting the use of offshore structures traditionally used by Chinese firms and investors to manage regulatory and capital restrictions.

In parallel, Chinese regulators have tightened oversight of offshore brokerage platforms. In May, the CCP imposed penalties on firms including Futu, Tiger Brokers, and Longbridge Securities for facilitating Chinese residents’ access to overseas stock markets, ordering certain accounts to gradually unwind positions over a two-year period.

The new framework also establishes a national security review mechanism for outbound investment, giving authorities broad discretion to block transactions deemed to pose security risks. Noncompliance could result in asset forfeiture and multi-year investment bans.

Li Chengpeng, a prominent Chinese writer and social critic, wrote on X that the regime could subject almost any transaction to national security review.

“As long as [authorities] deem an investment behavior potentially [affects] national security, they can conduct a security review,” Li wrote. “Those who fail to cooperate with the review will have their gains confiscated; for investments already made, they can be ordered to dispose of assets within a set period.”

The expanded review powers reflect a broader theme running through the regulations: Beijing’s effort to reconcile economic openness with growing security concerns.

Tang Bing and Luo Ya contributed to this report.