Recently, the Chinese Communist authorities have issued regulations on foreign investment, expanding restrictions on foreign trade and technology transfer. Observers believe that the move by the Chinese Communist authorities is akin to a “close the door and beat the dog” action against Chinese investors. It also highlights the internal conflict between “security” and development within the CCP, demonstrating the top leadership’s fear of losing control over the political and economic situation.
The official Chinese media reported yesterday (1st) that the authorities have issued the “Regulations of the State Council on Foreign Investment,” which will take effect from July 1, 2026. It stipulates that investors are not allowed to transfer prohibited exports or restricted exports of data and technology by dispatching technical personnel across borders, providing technical guidance, or arranging training.
Xu Zhen, a senior figure in the mainland capital sector, analyzed for the Epoch Times that the provision addressing the dispatch of data and technical personnel is likely aimed at Meta’s acquisition of the AI startup company Manus being halted.
At the end of April 2026, the Chinese National Development and Reform Commission blocked the $2 billion Meta (Facebook’s parent company) acquisition of Manus on the grounds of violating foreign trade rules. Manus is an AI startup established in China, moved its headquarters, core team, and business to Singapore in 2025, but its products are still being developed in China.
Chinese issues expert Wang He told the Epoch Times that the two main technologies the CCP aims to control are rare earth smelting technology and artificial intelligence technology. The CCP believes it can control the West by means of rare earth technology. In the field of artificial intelligence, the competition between China and the United States is very fierce, from the TikTok acquisition case to the Manus acquisition case, the CCP is unwilling to approve. It believes that it should block itself in these leading areas.
Xu Zhen stated that this also falls under the so-called countermeasures by the CCP against the U.S. restrictions on Chinese technology and investments in recent years. However, due to institutional limitations, the contribution of core technology personnel to innovation in China is also limited, which will only accelerate the economic decline of the CCP.
Wang He compared the difference in foreign investment review between the U.S. and China: China controls not only technology and data but also funds, emphasizing controlling the outflow of funds. Because the CCP dares not freely exchange Chinese yuan, China’s financial market is isolated from the West and the world. Meanwhile, the U.S. belongs to a country with freely exchangeable currencies, and it tightly controls exports of technology to China.
The CCP’s “Regulations” for the first time at the administrative regulation level define “resident individuals” within China, along with enterprises and social organizations, as “investors.”
Previously, on May 22, the China Securities Regulatory Commission, in conjunction with multiple departments, imposed heavy penalties on cross-border platforms such as Futu, Tiger Securities, and Changqiao that help mainland Chinese individuals trade U.S. stocks, and ordered violating accounts to gradually liquidate within two years.
The “Regulations” on foreign investment by the CCP also specify that the management of investments made by investors in Hong Kong, Macau, and Taiwan will be implemented according to the above regulations. This means that traditional models relying on Hong Kong holding platforms, cross-border billing, and offshore structures to isolate risks are essentially ineffective.
The “Regulations” by the CCP also establish a system for the review of overseas investment security, authorizing official reviews and halting foreign investments that may harm national security, with violators facing confiscation of income and a ban on investment for three years.
Commentator Li Chengbang stated that everything has signs in advance, but if you still have illusions and hopes, the worst results will inevitably arrive: when China (CCP) limits each person to exchanging only $50,000 worth of foreign currency per year, there will be a day when platforms like Futu and Changqiao assisting mainlanders in trading U.S. stocks will be shut down. When China (CCP) requires businesses to submit passports, there will be a day when even programmers will lose their freedom to travel abroad. When Wang Jianlin is banned from shopping, there will be a day when the $2 billion AI product of Manus by three young people will be halted by the National Development and Reform Commission.
Li Chengbang said that from the regulations, it is clear that the National Development and Reform Commission and the Ministry of Commerce have significant discretionary power. As long as they believe that an investment may affect national security, a security review can be conducted. Those who do not cooperate with the review will have their income confiscated, and those who have already invested can be ordered to dispose of their assets within a limited time. “Close the door and beat the dog. This is the most proficient technique of the Qin system.”
The “Regulations of the State Council on Foreign Investment” by the CCP begin by stating that they “adhere to the basic national policy of opening to the outside world, implement an overall national security view, coordinate development and security,” and so on. The regulations also claim to “promote the construction of an open world economy.”
Commentator Li Linyi said that the authorities’ actions exhibit the internal conflict between “security” and development, highlighting the top leadership’s fear of losing control over the political and economic situation. “This regulation, seen as a closed-door policy, emphasizes openness. It has Xi Jinping’s personal characteristics — he wants security while also pursuing openness, which is inherently contradictory and reflects extreme insecurity behind the scenes.”
Data compiled by Bloomberg Industry Research showed that last year, about $1 trillion in “hot money” flowed out of China, marking the largest annual scale of capital outflow since statistics began in 2006.
The latest data from the Chinese Ministry of Commerce shows that in April, foreign direct investment (FDI) decreased by 26.1% year-on-year. Foreign capital continues to exit mainland China.
Regarding the tightening control by the CCP on cross-border capital flows, Li Linyi believes that international cross-border capital flows are normal in an open society, except for countries like North Korea. Reform and opening up were the major trend in China many years ago, but since Xi Jinping came to power, he has reversed everything. Politically, it has become more like North Korea, resulting in a worsening economy.
Wang He stated that the CCP urgently needs to put the brakes on capital outflows, but if the entire Chinese economy cannot thrive in the long term, it will head towards decline. “Everyone sees the economic crisis in China, who would still keep money in China? So, although it appears to be tightened on the surface, various underground money lenders and channels will inevitably develop correspondingly.”
Since Xi Jinping took office in 2012, “security” has continuously risen in importance within the CCP’s policy system.
Zhao Ran, an independent scholar from Shanxi (pseudonym), stated in an interview that this control model by the CCP did not suddenly appear this year but has been escalating all the way. When the CCP deals with economic issues, the first thing they look at is not economic efficiency but whether they can control it and whether it will threaten their regime. If this continues, the contradictions between the people and the CCP will only deepen.