What happened
China's State Council published new regulations on June 1, 2026 that take effect July 1, 2026, codifying and expanding the legal framework the NDRC used to force Meta to unwind its $2 billion acquisition of AI-agent startup Manus. The rules require prior authorisation for cross-border transfers of restricted technologies, goods, services, and related data — and, critically, assert Chinese jurisdiction based on where technology was developed and where key personnel built their expertise, not merely where the acquiring or target company is currently incorporated.
Why it matters
The 'Singapore-washing' or Cayman-Islands restructuring playbook — found a company in China, relocate offshore, sell to a US buyer — no longer reliably shields cross-border AI acquisitions from Chinese regulatory review. The rules also ban unauthorised cross-border talent transfers in sensitive sectors, include retaliation authority (blocking foreign entities from trading with China if their home country restricts Chinese investment), and establish a legal basis for unwinding already-completed transactions. AI is explicitly identified as a sensitive, national-security-critical sector.
Action needed
Clients active in APAC M&A or with Chinese-origin AI IP in their supply chain should immediately engage legal counsel to map any pending or recently completed transactions against the new framework. Clients acquiring AI startups that relocated from China to Singapore or another offshore domicile within the last five years should specifically re-evaluate deal structure before July 1.