China requires government approval for U.S. investment in AI companies
China's government has instructed several of the country's top AI companies to obtain explicit approval before accepting U.S. capital, according to Bloomberg. The National Development and Reform Commission relayed the guidance to private firms over the past several weeks, requiring them to seek sign-off before taking on American funding.
AI startups Moonshot AI and StepFun received the instructions. ByteDance, owner of TikTok and China's most valuable private company, was separately told that secondary share sales involving American investors require Beijing's approval first.
The policy aims to keep American capital out of technology sectors Beijing considers strategically sensitive.
The Meta-Manus trigger
The new rules stem from Meta's acquisition of AI agent startup Manus, announced in December and valued at roughly $2 billion. The deal prompted a multi-agency Beijing probe led by the NDRC and including the Ministry of Commerce to examine foreign investment and technology exports.
Manus co-founders Xiao Hong and Ji Yichao were barred from leaving China during the review, Bloomberg reported.
Regulators scrutinized the deal because Manus, though incorporated in Singapore, was founded in China and maintained operational roots there. Beijing framed its review around what constitutes a technology export when the asset transferred is a team, system, and operational know-how rather than a conventional product.
Meta said there will be no continuing Chinese ownership interest after the deal closes and that Manus will discontinue services and operations in China.
Broader regulatory tightening
The investment curbs arrive alongside a separate Beijing initiative targeting red chip structures - offshore-registered vehicles that house Chinese businesses. Regulators have moved to block these entities from listing on the Hong Kong exchange.
StepFun, which is considering a $500 million Hong Kong float, is unwinding its overseas entities to meet those requirements. The restructuring could carry significant tax implications.
Both Washington and Beijing have tightened controls over cross-border capital flows into sensitive technology sectors. The U.S. imposed restrictions earlier, limiting American investment in Chinese AI, semiconductor, and quantum firms.
American investment in China's tech sector has a long history, with pension funds, university endowments, and venture firms like Sequoia Capital and Benchmark investing directly or through China-focused funds. The new approval rule could disrupt this funding for some of China's top AI companies.
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