China cracks down on US investment in tech sector after Meta-Manus deal

China is planning to restrict US funding in Chinese technology firms, including some of the country’s highest-profile AI pioneers, from accepting Washington funding without government capital.

The recent move comes as a sharp response after US tech giant Meta, the parent company of Facebook and Instagram, acquired the startup Manus.

According to a Bloomberg report based on the sources’ information privy to the matter, the agencies including the National Development and Reform Commission have instructed several tech firms about not accepting US-based investment unless they are allowed by the government.

Among the tech companies, Moonshot AI and fellow Chinese startup StepFun received these instructions.

As per sources, similar restrictive instructions were also given to ByteDance, Beijing-based owner of TikTok. Officials intend to block the company, which also manages a leading domestic AI chatbot, from authorizing secondary share sales to the US investors without explicit government clearance.

China’s intention behind funding restrictions

Beijing is imposing such restrictions because it does not allow the US investors to take stakes and dominant positions in sensitive sectors, which also hold significance for national security.

The recent development traces back to the $2 billion acquisition of Manus earlier this year. The deal drew the attention of Beijing authorities and prompted an investigation into illegal foreign investment and unauthorized technology exports.

New restrictions are also meant to cut off the flow of American capital that has supported the Chinese tech sector for over two decades. Hence, it risks isolating the tech sector that is already in a fragile state of recovery.

The move also suggest that regulators are worried about the growing influence of US on home-grown Chinese technologies

There is a growing desire to prevent technology leakage and keep homegrown innovations within domestic borders as startups look for global expansion.

However, the representatives for the NDRC and Ministry of Commerce and tech firms have not commented yet.