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China denies ordering tech firms to reject foreign investment
China’s National Development and Reform Commission said in Beijing on May 22 that it has never required domestic tech firms to reject foreign investment.
The statement came after reports said some startups had been told to avoid US capital unless regulators approved it.
In April, Bloomberg reported that the NDRC and other regulators had instructed several private tech companies, including AI startups, to refuse US funding in some rounds, citing people familiar with the matter.
Foreign investment is allowed if it complies with Chinese law and does not harm national security or national interests, said NDRC spokesperson Li Chao.
The denial follows Beijing’s order last month for Meta to unwind its acquisition of Chinese AI startup Manus, amid rising US-China scrutiny of AI over military and cyber risks.
🔗 Source: Reuters
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Implications, context, and why it matters.
Beijing denies moves that hit leading AI firms
- The National Development and Reform Commission (NDRC) and other Chinese regulators told AI firms including Moonshot AI and StepFun to get government approval before taking US funding 1.
- ByteDance, China’s most valuable private company, was told that any secondary share sale to American investors needed Beijing’s approval first 2.
- Those instructions came after Meta planned a US$2 billion purchase of Manus, an AI startup based in Singapore and founded by Chinese entrepreneurs. The plan triggered a multi-agency probe led by the NDRC 2.
- China later ordered Meta to unwind the deal. Manus’s co-founders were also barred from leaving China 3, 2.
Capital controls disrupt a long-running investment model
- For years, US investors used offshore setups, including so-called red chip structures, to back Chinese tech companies such as ByteDance. These arrangements often let firms raise foreign money despite ownership limits in some sectors 4.
- Beijing is now going after that approach through two tracks. One limits US capital, while another blocks red-chip companies from listing in Hong Kong 2.
- StepFun is already dismantling its overseas entities to meet those rules before a possible US$500 million Hong Kong listing 2.
- These steps keep sensitive technology closer to state control and give regulators more say over cross-border investment, alongside US limits on outbound investment into Chinese AI 2.
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