China mulls 3 new AI export curbs to close acquisition loopholes

China's commerce ministry is consulting Alibaba, ByteDance and Zhipu on restricting overseas access to the country's most advanced AI models, targeting a regulatory loophole exposed by Meta's unwound $2 billion Manus acquisition.

China's Ministry of Commerce is consulting top AI companies on export controls that would restrict overseas access to the country's most advanced models and prevent Western acquisition of domestic AI startups, the Financial Times reported.

"Regulators are looking at how to stop China's advanced technologies and leading startups from being acquired by the West," a person involved in the discussions told the Financial Times.

The proposals, still under review with industry feedback being gathered, would restrict the overseas transfer of key training data and limit foreign users from downloading model weights, according to the report. Authorities have also sought views on preventing overseas chipmakers including Qualcomm Inc. and Taiwan Semiconductor Manufacturing Co. from producing advanced semiconductors based on designs by Chinese companies such as Huawei Technologies Co., Alibaba and ByteDance.

The potential curbs reflect Beijing's determination to keep frontier AI technology within China as the gap with the US narrows. Moonshot AI's Kimi K3 model, released last week, outperformed Anthropic's flagship Opus 4.8 in most benchmark tests, demonstrating China's rapid progress. The measures could be incorporated into the next revision of China's catalogue of technologies prohibited or restricted from export.

The Manus Precedent

The push to tighten controls follows what Beijing views as a regulatory loophole that enabled Meta Platforms Inc. to acquire Manus for $2 billion — a deal Chinese authorities later ordered unwound. Restrictions may also target overseas acquisitions involving strategic technology groups in areas such as agentic AI, the FT reported, citing sources. The Manus case highlighted how Western companies could bypass existing controls by acquiring Chinese AI startups directly rather than licensing their technology.

Market Impact and Forward Outlook

Z.AI (02513.HK), one of the companies consulted, surged 31.8% on the day as investors interpreted the protectionist measures as a tailwind for domestic AI champions. Alibaba (09988.HK) rose 0.7%. The US-China tech decoupling is deepening: the US imposed export controls on advanced AI chips to China in October 2022 and tightened them in October 2023, restricting Nvidia Corp.'s A100, H100 and subsequent chips. China's response — restricting its own AI assets from leaving — creates a bifurcated market where both sides hoard strategic technology.

The current average US tariff on Chinese goods stands at about 19.3% after the 2024 escalation, while US chip export controls have already reduced China's access to advanced semiconductors. If Beijing enacts these new restrictions, Chinese AI companies operating overseas — including those with US research labs or foreign training data partnerships — would face significant operational hurdles. The commerce ministry is expected to finalize the revised export catalogue in the coming months after incorporating industry feedback.

The proposed controls also extend to chip design. Chinese companies including Huawei, Alibaba and ByteDance have developed their own chip designs currently manufactured by TSMC and other foundries. Restricting this production would force China to rely more heavily on domestic chipmakers like Semiconductor Manufacturing International Corp., which trails TSMC by several process generations. This could slow China's AI progress but also accelerate investment in domestic semiconductor supply chains.

This article is for informational purposes only and does not constitute investment advice.