Kathmandu. China has imposed tough national security rules on foreign investment and cross-border investment amid growing competition in the technology sector.

The new regime empowers the government to further monitor and review the cross-border movement of investment, technology, services and skilled manpower that could have an impact on national security.

The rules, announced on June 1, create a broad legal basis for regulating capital, personnel, technology and service activities crossing China’s borders. According to the provisions issued by the State Council of China’s Council of Ministers, its purpose is to protect national security by improving the quality and standard of foreign investment.

According to the rules, all foreign investment must comply with a “comprehensive national security approach” and maintain a balance between domestic and international interests. It also gives the government the power to review any investment or asset transfer that could affect national security.

Beijing sees artificial intelligence, computer chips and green technologies as strategically and economically important sectors and prioritizes the domestic development of these industries. Meanwhile, surveillance on cross-border transactions has been tightened.

Under the new system, export controls, which were limited to goods and data so far, have now been extended to services, technology transfers, and the sending of technical experts abroad or training abroad.

The move has also raised concerns that foreign investors’ access to China’s vast tech market could be limited. In April, Meta also objected to an attempt to acquire Manus, a China-based and now Singapore-based AI startup, as part of China’s cautious approach to cross-border investment.

The U.S.-China Economic and Security Review Commission said the decision was a continuation of a long-standing trend of China increasing its control over foreign investment in the name of national security. The commission said in May that authorities have broad authority over the interpretation and enforcement of China’s national security law, which could lead to increased legal uncertainty and business risks for foreign companies.