China tightens outbound investment rules

Key facts

• China issued new rules tightening control of overseas deals involving Chinese investors, technology, data, and national security.
• The rules take effect from July 1.
• Authorization is required for exports of restricted Chinese goods, technologies, services, or related data.
• The regulations provide a formal legal basis for China to force the unwinding of completed overseas transactions.
• Cross-border talent transfers in sensitive sectors require approval.
• Beijing can ban foreign entities from trading with China if their home countries restrict Chinese investment.

These new regulations signal a more cautious approach by China towards outbound investments, particularly in sensitive sectors like technology and data. The expanded scrutiny aims to safeguard national security and control the flow of critical technologies and data abroad, potentially impacting future cross-border M&A activities involving Chinese entities. The rules also provide Beijing with retaliatory measures against countries that restrict Chinese investment.