China’s State Council Decree No. 837 enters into force on July 1 as a regulation to promote “high-quality opening-up” and support the orderly global expansion of Chinese capital. Chinese companies investing abroad will face closer state control over which technology they can transfer, who they can send to implement it, and how much know-how they can share.
Since it only affects Chinese companies, Decree No. 837 initially received less global attention than the two State Council decrees that predated it. Decree No. 834 on supply chain security and Decree No. 835 on countering improper extraterritorial jurisdiction were explicitly designed to target foreign states and companies, which saw the regulations as a direct threat. Decree No. 834 treats industrial and supply chain security as a national security issue, giving Chinese authorities a legal basis for intervening. Decree No. 835, for its part, sets out China’s response to foreign extraterritorial measures it considers improper, including countermeasures for companies or individuals.
However, the fact that Decree No. 837 is domestically focused makes it potentially more impactful. China is the world’s third-largest source of foreign investment, meaning that most countries are directly affected by the conditions imposed on Chinese investors.
Under Decree No. 837, Chinese companies investing abroad are now explicitly subject to continuous state supervision throughout the entire investment lifecycle. They must report to regulators, pass security reviews, and align their operations with China’s national objectives, including safeguarding the country’s image and adhering to its overall security concept when operating overseas.
This intensified control is especially significant in cases where technology and knowledge transfer are a requirement for large investments. Article 13 bans the transfer of restricted technologies, data, and services by any means: sending engineers abroad, organizing cross-border training programs, providing remote technical guidance, or staffing foreign operations with Chinese personnel who possess proprietary knowledge.
These restrictions cover rare-earth processing, lithium-battery manufacturing for electric vehicles, AI algorithms, biotechnology, and aerospace guidance systems. Thus, Chinese authorities can now legally block the outward flow of technology precisely in sectors where they hold the most competitive advantages.
The policy China is now applying to its own outbound investors is a startling reversal of the playbook that it used for decades to squeeze foreign firms entering its market. In the 1980s and 1990s, foreign companies that wanted access to the Chinese market were often pushed into joint ventures with local partners; those partnerships were designed not only to attract capital, but also to absorb technology, management skills, and industrial know-how.
This is why the issue matters so much in Europe. European companies have long argued that when they invested in China, they were often expected to bring know-how, train local staff and accept limits on how much technology they could keep for themselves. In other words, China’s market access was frequently tied to a broader process of learning from foreign investors, especially in sectors where Chinese firms were still trying to catch up.
China is now reversing that logic for its own companies abroad. Having moved further up the value chain, it is not willing to let the same kind of knowledge flow happen in reverse. China’s message is effectively the opposite: if Chinese firms invest abroad, they cannot be forced to give away the know-how that gives them a competitive advantage. After years of being asked to share knowledge in order to enter China, Europe now faces a China that wants to protect its own technology abroad just as strictly.
That said, Article 13 is only formalizing something that was already occurring in practice. For example, two months ago, Chinese authorities blocked Meta’s proposed acquisition of Manus. This AI startup with Chinese founders had moved its headquarters to Singapore before the $2 billion deal, a maneuver dubbed “Singapore washing” – shifting a Chinese company’s legal domicile abroad to make it less exposed to Chinese regulatory scrutiny.
Beijing’s intervention showed that China would look past offshore corporations when strategically sensitive, homegrown technology and know-how were involved, regardless of corporate domicile. Article 13 writes that principle into law.
Since this was already the government’s modus operandi, the importance of Decree No. 837 is more about the broader shift in how Beijing now legally backs outbound investment. Chinese companies are no longer just commercial links but part of an overall strategy framed by current geopolitical risks and intensifying international competition. China is shifting from a focus on investment volume to a more selective approach that prioritizes the protection of its strategic assets and know-how.
This kind of approach reinforces a more fragmented, protectionist global economy, where access to markets is determined by China’s strategic rivalry with the West. This is part of a broader global trend in which more and more governments are turning inward and adopting protectionist tools that were once seen as exceptions.
Even the European Union, long proud of being a champion of free trade, is now moving in that direction. The Industrial Accelerator Act (IAA) aims to boost European manufacturing’s share of the bloc’s GDP through four pillars: faster permitting for industrial projects; creating lead markets for strategic sectors with mandatory “Made in EU” and low-carbon requirements in public procurement; applying conditions on FDI in strategic sectors: and designating industrial-acceleration areas.
Of the four pillars of the IAA, the one that has generated the most controversy, especially in China, is the “Made in EU” requirement. The goal is to prevent non-EU companies from simply benefiting from the European market while producing, sourcing, or transferring key value creation elsewhere.
With the IAA, the EU is trying to pull production and know-how inward, while China is trying to stop its own firms from sending that same know-how outward, through Decree No. 837. Both measures are responses to the other side’s protectionism and are mutually incompatible. In this, they contribute to making that protectionism stronger, pushing both sides further into a more antagonistic trade environment in which the consumer always loses.
