Decree 837: As Beijing looks deeper, investors must too

Part of China’s wider regulatory turn

Our discussions with Chinese venture capital executives, cross-border M&A lawyers and investment professionals suggest that market participants do not view the decree as simply codifying existing procedures. Instead, they increasingly see it as reflecting Beijing’s evolving approach to technology governance and the growing integration of national security considerations into cross-border investment. 

Over the past decade, and particularly since 2020, Beijing has steadily expanded the legal and regulatory tools available to protect technologies, data, supply chains and other assets considered important to China’s strategic interests. This evolution reflects both China’s emergence as a global technology leader in critical sectors such as electric vehicles, batteries, renewable energy, robotics and artificial intelligence, and a geopolitical environment in which access to advanced technology has become increasingly contested.  As a Shanghai-based lawyer put it:

“The wording of the new regulations conveys a stark reality: in fields such as AI and advanced manufacturing, technology is no longer viewed as private corporate property, but as a national strategic resource.

The purpose is to prevent scientific achievements, commercial secrets, sensitive data, and core algorithms developed in China from flowing overseas through regulatory loopholes.”

The United States and several other governments have responded to China’s technological rise through export controls, investment restrictions and other measures targeting sensitive technologies. In turn, Beijing has developed an increasingly sophisticated legal framework designed both to protect strategic industries and to create mechanisms for responding to foreign restrictions. Milestones in this process include the Export Control Law, which came into effect in December 2020, and the Anti-Foreign Sanctions Law of June 2021, which created a legal basis for retaliatory measures against foreign entities and individuals involved in implementing sanctions or other measures viewed as discriminatory towards Chinese interests. 

The practical implications are already visible. In April 2026, China’s National Development and Reform Commission reportedly required the unwinding of Meta’s proposed acquisition of Chinese AI start-up Manus, citing China’s foreign investment security review framework. While the case was highly unusual, it illustrated a broader principle underpinning the emerging regulatory environment: where Beijing considers a company or technology to possess strategic importance, cross-border transactions are increasingly likely to be assessed through a national security lens, rather than purely commercial or competition considerations. 

What this means for investors, acquirers, and transaction teams

Decree No. 837 creates further uncertainty for market participants. When does a commercial asset become a strategic asset? And when does an offshore transaction become a China security question? 

For investors and acquirers, the key shift is not a new Beijing filing requirement but the move to a “whole-process supervision.” Due diligence is no longer just about whether the target is properly incorporated, solvent, litigation-free, and sanctions-clean. The harder question is whether the asset carries a Chinese regulatory history that the current transaction documents do not reveal.

First, buyers need to investigate provenance, not just ownership. Diligence should establish where the technology, IP, data, and know-how originated; how they were developed; who contributed them; and whether any offshore transfer complied with Chinese ODI, technology-export, data-transfer, or foreign-exchange requirements. A clean holding structure does not prove a clean transfer history.

Second, buyers need to look beyond the immediate transaction perimeter. Chinese regulatory exposure may sit several layers beneath the target – in legacy R&D arrangements, historical ownership, founder contributions, technical personnel, data flows or affiliated entities – even where the current seller and holding structure are offshore. As the Shanghai-based lawyer told us: 

“Under the new regulations, if the underlying assets originate in China, or involve the overseas transfer of Chinese technology, intellectual property or data, the transaction may be treated as outbound investment regardless of how many layers of Cayman, BVI or Singapore entities sit in between.”

Third, China exposure should be treated as an evolving issue, not a signing condition. The move to “whole-process supervision” means the relevant questions do not end at closing. Acquisitions, restructurings, licensing arrangements, refinancing transactions and disposals of existing overseas assets may all warrant renewed scrutiny where Chinese-origin technology, data or strategic assets are involved. In sensitive sectors, that scrutiny may focus less on the share-purchase agreement than on the arrangements around people, data and technical support: who moved abroad, what know-how they carried, and what overseas operations they helped build.

Investors will therefore need to monitor China’s regulatory environment continuously, including how enforcement priorities are developing in practice. As one China policy expert observed:

‘More than ever, companies will need to maintain open lines of communication with regulators such as MOFCOM and the NDRC. For domestic companies, these discussions often take place informally, through meetings, dinners, and WeChat messages, well before any public announcement or regulatory action.

As a result, foreign companies can find themselves at a disadvantage. Unless they have a strong on-the-ground presence and trusted local relationships, they are far less likely to detect the subtle signals regulators may be communicating to other market participants.’

For foreign investors, understanding not only what the rules say, but also how they are being interpreted and enforced in practice, may prove critical in identifying emerging risks before they become formal regulatory obstacles. Thus, as Beijing looks deeper into the provenance of technology, data, and strategic assets, investors will need to do the same. 

Looking beneath the transaction

For investors and transaction teams, this is increasingly an environment where due diligence alone is not enough. Risk Advisory combines intelligence, rigorous analysis and a global network to uncover hard-to-access information and help clients understand the provenance of technology, data and strategic assets; identify less visible China exposure; and assess how rules are being interpreted and enforced in practice.

By bringing greater clarity to these complex and often opaque areas of risk, we help clients identify potential regulatory obstacles earlier and make better informed decisions on transactions, counterparties and long-term exposure.