China's new rules give the West a new headache

"Chinese authorities blocked Meta's $2 billion (1.7 billion) takeover of the artificial intelligence (AI) startup Manus last month, sending a clear signal that even deals structured outside China's borders are no longer safe. Manus is headquartered in Singapore, but has strong Chinese roots. China viewed the firm as one of its strategic assets in the global AI race and blocked the deal on national security grounds."

"The move followed Beijing's swift introduction of the Regulations on Industrial and Supply Chain Security, also in April. These measures strengthen its ability to stop US tech giants from buying up high-end Chinese technologies. The new rules, however, have much broader consequences. In practice, Beijing is warning foreign governments and companies against decoupling."

"Chinese authorities can now retaliate against foreign firms that move factories to countries like Vietnam or India, or reshore production back home. They could also face fines and supply chain blacklisting if they comply with United States and European Union export controls or sanctions targeting Chinese entities. Some firms have moved some China production to countries like Vietnam."

"It's effectively meant to derail de-risking measures such as those the EU and member states, including Germany, have been taking to reduce dependency on China. Since the pandemic, both the EU and the US have stepped up efforts to make supply chains more resilient and less d"

Western firms reduce reliance on China through decoupling or de-risking by moving production or buying fewer parts. Chinese authorities blocked Meta’s $2 billion takeover of AI startup Manus, headquartered in Singapore but with strong Chinese roots, citing national security. The decision followed new Regulations on Industrial and Supply Chain Security introduced in April. The rules broaden China’s leverage by warning foreign governments and companies against decoupling. China can retaliate against firms that shift factories to countries such as Vietnam or India or reshore production. Firms may face fines and supply chain blacklisting if they comply with US or EU export controls or sanctions targeting Chinese entities.

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