Quick overview

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Beijing has ordered companies such as ByteDance, Moonshot AI, and StepFun to reject U.S. investment without official approval, in a move that escalates bilateral tensions and aims to safeguard technologies tied to national security.

China is advancing one of its most forceful moves yet in the trade and tech standoff with Washington: the government will instruct leading firms—including top artificial intelligence (AI) startups—to turn down American capital unless it has prior state authorization.

The National Development and Reform Commission (NDRC) and other regulators have already issued directives to several private tech companies to decline U.S.-sourced funding in investment rounds unless explicitly approved by authorities, according to Bloomberg News, citing people familiar with the matter.

Among the firms said to have received these orders are Moonshot AI and StepFun, two of the country’s most promising AI startups. The restriction also extends to ByteDance, the parent of TikTok, with regulators reportedly blocking secondary share sales to U.S. investors without official clearance.

The move follows scrutiny sparked by Meta’s acquisition of Manus, a Chinese AI startup, in a deal valued at over $2 billion in 2025. The transaction triggered investigations into foreign investment in Chinese firms and technology exports, amid concerns it could enable the transfer of cutting-edge capabilities abroad.

National security and a critical link to Silicon Valley

China’s escalation mirrors steps taken by Washington months earlier, when U.S. authorities restricted outbound investment into Chinese companies operating in AI, semiconductors, and quantum computing on national security grounds.

The stated objective of the government led by Xi Jinping is similar: to prevent U.S. capital from gaining exposure to sensitive technologies tied to national security. However, the financial relationship between the two powers runs deep, suggesting growing friction ahead for companies on both sides.

For years, venture capital firms such as Sequoia Capital and Benchmark funneled capital into China’s tech ecosystem, while companies like Apple, Microsoft, and Tesla built deep operational ties with the country. U.S. pension funds and endowments also supported investment vehicles focused on China, helping fuel the rise of internet platforms, electric vehicles, and AI.