For decades, China has been one of the world’s most attractive destinations for foreign investment, offering access to a vast consumer market, sophisticated manufacturing capabilities and an increasingly innovative technology sector. Today, however, multinational companies are navigating a more complex regulatory environment as Beijing introduces new measures aimed at strengthening national security and protecting strategic industries.
The changes come at a time when President Xi Jinping continues to reassure global investors that China remains committed to opening its economy. In meetings with foreign leaders and international business executives this year, Xi has repeatedly said China’s doors are “opening wider,” urging companies to continue investing in the world’s second-largest economy.
While those assurances have been welcomed by many businesses, China’s evolving legal framework has prompted some investors to reassess how they manage regulatory, operational and geopolitical risks.
Over the past several years, China has steadily expanded legislation governing cybersecurity, data protection, industrial security and outbound investment. Chinese authorities argue these measures are necessary to safeguard national security, strengthen supply chains and protect critical technologies in an increasingly uncertain global environment.
Many governments around the world, including the United States and members of the European Union, have also introduced tighter investment screening and technology protection measures, reflecting a broader global shift in which economic policy is becoming more closely linked to national security.
For companies operating in China, however, the cumulative effect of the new regulations has increased compliance obligations and introduced additional layers of regulatory oversight.
China’s National Intelligence Law, first enacted in 2017, requires organisations and citizens to support national intelligence work in accordance with the law. Since then, Beijing has introduced the Cybersecurity Law, the Data Security Law and the Personal Information Protection Law, creating a comprehensive framework governing data management, cybersecurity and information protection.
In 2026, that framework expanded further.
In April, China’s State Council introduced new Regulations on Industrial and Supply Chain Security, which took effect immediately. The rules broaden government oversight of activities considered relevant to industrial resilience and national security, including supply-chain management and corporate due diligence.
Two months later, additional regulations strengthened oversight of outbound investment in sectors such as artificial intelligence and other strategically sensitive industries. The revised framework also gives authorities broader powers to review overseas investments and intervene where projects are considered to have national security implications.
The regulatory changes are already influencing cross-border investment decisions.
Earlier this year, China’s National Development and Reform Commission reportedly blocked Meta’s proposed acquisition of Chinese artificial intelligence start-up Manus, demonstrating Beijing’s willingness to subject foreign acquisitions to national security review.
Under the revised framework, security assessments for certain overseas investments may now take several months before approval is granted.
The developments coincide with tighter investment controls in the United States, where Washington has expanded restrictions on outbound investment into Chinese semiconductor, artificial intelligence and quantum technology companies.
Together, these parallel measures reflect growing strategic competition between the world’s two largest economies, with technology and national security increasingly shaping international investment policies.
For international businesses, the challenge is not necessarily deciding whether to remain in China, but determining how to manage an increasingly complex regulatory environment.
Companies are placing greater emphasis on legal compliance, cybersecurity, data governance and supply-chain resilience as governments on both sides introduce additional regulatory requirements.
Corporate governance has also attracted greater attention.
Foreign business groups have noted that companies operating in China are expected to comply with evolving governance requirements while also meeting obligations under China’s national security and intelligence laws. Although many firms continue to operate successfully in the country, some investors argue that these requirements have increased compliance costs and operational complexity.
China has made significant progress in strengthening its intellectual property system over the past decade.
Specialised intellectual property courts have expanded, enforcement mechanisms have improved and official surveys indicate growing confidence among some foreign businesses regarding IP protection.
Nevertheless, concerns remain among certain international companies and industry associations regarding technology transfer, cybersecurity obligations and the protection of commercially sensitive information.
Some business groups argue that regulatory uncertainty, together with geopolitical tensions, has made boards more cautious when evaluating new investments in high-technology sectors.
Despite the changing regulatory landscape, few multinational companies are leaving China altogether.
China remains one of the world’s largest consumer markets, an essential manufacturing hub and a key part of global supply chains.
Instead, many businesses are adjusting their investment strategies by strengthening compliance programmes, diversifying supply chains and carefully evaluating future capital commitments.
Rather than signalling a broad retreat from China, the latest regulatory changes appear to be prompting a more measured reassessment of risk.
For Beijing, the challenge will be balancing its objective of protecting national security with its ambition to remain one of the world’s leading destinations for international investment.
As governments around the world place greater emphasis on economic security, businesses are increasingly operating in an environment where commercial opportunity, regulation and geopolitics are becoming inseparable.
