China tightens foreign investment oversight with new rules

China has issued new regulations governing foreign investment, granting authorities broader powers to scrutinise overseas transactions, control sensitive transfers, and respond to foreign restrictions targeting Chinese investors. Signed by Chinese Premier Li Qiang on 5 May, the rules will take effect from 1 July, according to a State Council statement published by government news agency Xinhua on Monday. The regulations were approved at a State Council executive meeting on 17 April. They apply to foreign investments by entities and individuals within China, including companies, other organisations, and residents. Under the rules, investors are prohibited from exporting, using, or transferring abroad items, technology, services, or related data subject to export restrictions without permission. The rules also ban such transfers through cross-border personnel assignments, technical guidance, or training without official approval. The regulations establish a national security review mechanism for foreign investments and asset or rights transfers that affect or could affect national security. Companies and individuals involved in such transactions must cooperate with reviews and comply with official decisions. The framework also outlines potential countermeasures against foreign entities or individuals that Beijing deems to have undermined China’s sovereignty, security, or development interests, imposed discriminatory restrictions on Chinese investors, or arbitrarily severed business ties with Chinese companies. Possible measures include restrictions on imports, exports, investments, transactions, and cooperation related to China, as well as limitations on entry, employment, residence, and stay for related personnel. The new rules come as China seeks to strengthen oversight of cross-border capital, technology, and data flows while resisting increased foreign scrutiny of its companies and supply chains.