Chinese regulators are moving to restrict domestic technology firms from accepting U.S. investment without prior government approval, according to Bloomberg report. Agencies including the National Development and Reform Commission have advised several AI startups to avoid U.S.-origin funding unless explicitly cleared. Companies such as Moonshot AI and StepFun were among those reportedly given guidance. The policy shift follows scrutiny of Meta Platforms’ acquisition of Manus, which raised concerns about foreign access to Chinese-developed AI technology.
The restrictions are part of a broader effort to safeguard sensitive sectors tied to national security. Regulators are also applying similar oversight to ByteDance, limiting its ability to approve secondary share sales to U.S. investors without approval. The probe into the Manus transaction involves multiple agencies, including the Ministry of Commerce, reflecting the importance of the issue at a national level. The deal, valued at about $2 billion, had initially been seen as a model for global expansion before triggering backlash over potential technology transfer.
The move could significantly affect China’s technology funding ecosystem. For decades, U.S. investors such as pension funds and endowments have played a major role in financing Chinese startups. Recent measures, including restrictions on so-called red-chip companies listing in Hong Kong, suggest regulators are increasingly focused on preventing capital and technology from moving offshore. Startups like Moonshot AI, reportedly seeking up to $1 billion in funding, and StepFun, considering a $500 million listing, may need to restructure to comply with new rules.
Capital Controls Tighten
The new guidance signals a shift toward tighter control over foreign participation in China’s AI sector. By limiting access to U.S. capital, regulators aim to reduce the risk of sensitive technologies being transferred abroad. This could lead to greater reliance on domestic funding sources and state-backed investment, potentially slowing fundraising for some startups while strengthening government influence over strategic industries.
For companies, the restrictions introduce additional complexity in structuring funding rounds and planning international expansion. Deals involving offshore entities or foreign investors may face delays or require restructuring, increasing costs and uncertainty. For global investors, the move reduces access to one of the world’s largest and fastest-growing AI markets.
Policy Shift After Manus Deal
The crackdown follows the acquisition of Manus, a Singapore-incorporated AI startup founded by Chinese entrepreneurs, which relocated staff and operations ahead of its sale. The deal prompted investigations in both China and the United States, highlighting regulatory gaps in cross-border transactions involving advanced technology. Chinese authorities are now examining how similar transactions can be prevented or more tightly controlled.
The broader backdrop includes rising geopolitical tension over technology leadership. Washington has already imposed restrictions on U.S. investment in certain Chinese sectors, including semiconductors and AI, citing national security concerns. Beijing’s latest measures mirror that approach, marking a more defensive stance after years of encouraging foreign investment to build globally competitive companies.