(April 24): Chinese regulators plan to restrict technology firms including some of the country’s highest-profile AI pioneers from accepting US capital without government approval, part of Beijing’s broader response to Meta Platforms Inc’s controversial acquisition of start-up Manus.
Agencies including the National Development and Reform Commission have told several private firms in recent weeks they should reject capital of US origin in funding rounds unless explicitly approved, according to people familiar with the matter. Moonshot AI, which is considering an initial public offering, was among those that got the guidance from the powerful state planner, according to a person familiar with the matter. Fellow Chinese start-up StepFun received similar instructions, another person said, asking to remain anonymous to discuss a non-public matter.
Regulators have also decided on similar restrictions for ByteDance Ltd, the owner of TikTok and the most valuable start-up in the country, the people said. They don’t want the Beijing-based company, which also operates one of China’s most popular AI chatbots, to approve secondary share sales to US investors without government approval, one of the people said.
The over-arching intent of the latest restrictions is to prevent US investors from taking stakes in sensitive sectors where national security is a priority, the people said. The previously unreported move stems from the US$2 billion ($2.6 billion) Manus buyout earlier this year, which triggered a Beijing probe into illegal foreign investment and tech exports shortly after its December announcement. The deal was initially hailed as a template for start-ups with global aspirations, but critics have since lamented the loss of valuable AI technology to a geopolitical rival.
The commission — a powerful state planning agency with broad policy-making powers — is now heading a multi-agency probe that includes the Ministry of Commerce into the deal and its repercussions, the people said.
Representatives for the NDRC and Ministry of Commerce didn’t respond to faxed requests for comment. Moonshot and Stepfun spokespeople didn’t respond to requests to comment. ByteDance representatives also didn’t respond to messages seeking comment.
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The new restrictions risk further isolating China’s recovering tech sector from the venture backing that has underpinned it for two decades, much of which was sourced from American pensions and endowments. It follows Beijing’s decision to restrict “red chips” — a type of Chinese company incorporated overseas — from seeking initial public offerings in Hong Kong, threatening to upend a decades-old playbook that helped Chinese companies tap foreign capital by floating overseas.
The twin moves suggest that regulators are worried about a leakage of homegrown technology abroad as Chinese-founded start-ups and companies explore international opportunities. In the wake of the Manus acquisition, many academics decried the loss of a valuable asset to the US. Many worried that the deal would encourage other start-ups to follow suit.
To be sure, Washington has restricted investments into certain Chinese technology sectors, for fear of helping advance its military or economic might. In 2025, US rules designed to curb investment in Chinese-owned semiconductor, quantum and AI companies took effect.
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But Beijing had for years encouraged its most ambitious firms to seek business and partnerships abroad, including from US financiers, recognising the need to foster world-class players in areas from electric vehicles to electronics. And global capital allocators have begun re-evaluating China — a shift accelerated by the breakout successes of AI phenom DeepSeek in 2025.
At the heart of the post-Manus debate was the way the start-up restructured to make a sale to a foreign company possible before any regulatory review in Beijing.
Manus was a Singaporean-incorporated firm, but its founders hailed from China. Launched in March 2025, Manus is a general AI agent capable of automating complex tasks, ranging from S&P 500 analysis to drafting sales pitches. A month later, its parent Butterfly Effect raised US$75 million in a round led by Silicon Valley’s Benchmark, valuing it at US$500 million. The investment triggered a probe by the US Treasury over potential violations of restrictions on investments in sensitive technologies.
In July, Manus relocated its China-based staff to Singapore, cutting dozens of roles in the process. Meta announced its acquisition in December after Manus surpassed US$100 million in annualised revenue.
It remains unclear what other action Beijing will take following its investigation. Manus co-founders Xiao Hong and Ji Yichao had been barred from leaving China, the Financial Times reported in March.
Large language model makers remain some of the most coveted investment targets.
Beijing-based Moonshot is seeking to raise as much as US$1 billion in an expanded funding round that would value the start-up at about US$18 billion, Bloomberg News reported last month.
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Its Shanghai rival StepFun, which is considering a US$500 million float in Hong Kong, is in the process of unwinding its overseas entities and onshoring capital to meet regulatory requirements, the people said. The restructuring, which could take months and carry significant tax implications, comes as regulators ramp up scrutiny over so-called red-chip firms — entities registered offshore that house Chinese businesses and assets.
ByteDance is the highest-profile private company in China, in part because of the success of video app TikTok. The parent company had to sell a majority stake in TikTok’s US operations after a years-long battle with the US government.
ByteDance is much more established than its smaller AI competitors and it’s not clear the company would seek to raise additional money from outside investors. The company has long been considered a prime candidate for an eventual IPO.
Uploaded by Magessan Varatharaja
