Beijing Entrenches Asymmetric Closed-Door Strategy
Executive Summary:
- The People’s Republic of China (PRC) is constructing a functional closed-door regime for the core factors of production, simultaneously retaining people, capital, frontier technology, and proprietary information inside the country under the banner of national security.
- Mobility controls once limited to senior cadres now extend across the entire administrative apparatus and into the private sector, with judicial and administrative exit bans applicable to ordinary citizens, private-sector founders, and foreign nationals operating inside the PRC.
- Outbound capital faces a closing aperture. Traditional foreign exchange channels remain quota-constrained, while the cryptocurrency and offshore renminbi-pegged stablecoin routes that previously absorbed unsanctioned outflows have been formally shut.
- Frontier technologies are retained through a periodically expanded export-control catalogue that defines the standing prohibitions and restrictions and a foreign-investment security review that backstops it by blocking outbound flows the catalogue does not list, as the Manus case demonstrates.
- Information outflows have been re-characterized as a national security risk, with overseas access to corporate, financial, and academic databases curtailed, in-country due diligence by foreign firms constrained, and important data required to remain onshore.
In April, the State Council of the People’s Republic of China (PRC) issued two consecutive administrative regulations with immediate effect: Order No. 834, the Provisions on the Security of Industrial and Supply Chains (产业链供应链安全管理条例), and Order No. 835, the Regulations on Countering Improper Foreign Extraterritorial Jurisdiction (反外国不当域外管辖条例) (Xinhua, April 7; April 13). Two weeks later, the Office of the Working Mechanism for the Security Review of Foreign Investment of the National Development and Reform Commission (NDRC) prohibited Meta’s acquisition of Manus, a Chinese-origin artificial intelligence (AI) agent firm, ordering both parties to undo the transaction (NDRC, April 27). The decision arrived after Manus co-founders Xiao Hong (肖弘) and Ji Yichao (季逸超) had been summoned to Beijing in March and placed under exit bans, preventing their departure during the security review (Financial Times, March 24).
Regulatory measures of this nature, such as supply chain regulations, countersanctions instruments, and foreign investment reviews, may appear as a series of isolated incidents, but represent functionally aligned enforcement driven by a single guiding doctrine. Each domain of cross-border outflow has been reclassified as a national security matter, requiring an inter-ministerial review process that can lead to outflows being blocked under an expanding coercive toolkit. The Manus case is only one recent example of this doctrine in action, with a single transaction simultaneously activating controls on persons (exit bans on the founders), capital (the foreign investment security review), technology (the export-review framework applied to model architecture and engineering know-how), and information (the cross-border treatment of training data).
Outbound Mobility Controls Extend From Cadres to Private Citizens
Controlling outbound mobility is foundational to this doctrine. This hinges on ensuring that the persons who control a transaction or asset are inside PRC jurisdiction—even if the transaction or asset is otherwise outside it. The legal basis for this control is dispersed across the Exit and Entry Administration Law (出境入境管理法), the Criminal Procedure Law (刑事诉讼法), and counterespionage legislation, with substantial administrative discretion at each layer. Search results on the official China Judgments Online (中国裁判文书网) database for civil and criminal cases spanning 2016–2025 show that mentions of “exit ban” (限制出境) in verdicts grew rapidly over the latest ten-year period and largely doubled every year between 2021 and 2024. This reflects an expansion in the statutory base: by 2023, 14 laws authorized exit bans, including four enacted between 2018–2022 alone, such as the Supervision Law (监察法), which allows exit bans on individuals merely connected to an investigation (SPP, February 5, 2025; Safeguard Defenders, May 5). Orders No. 834 and 835 sit one tier below, as administrative regulations issued under that statutory authority but adding new operational triggers for exit bans in the supply-chain and countersanctions contexts.
Across the Party-state apparatus, a parallel and longer-standing regime governs civil servants, employees of public institutions (事业单位), and state-owned enterprise (SOE) managers. Its earliest visible form was the early-2010s “naked officials” (裸官) regime, which removed senior cadres whose spouses and children had emigrated abroad on the theory that overseas ties constituted both evidence of disloyalty and a vector of foreign coercion (China Brief, January 14). The instruments built on that doctrine have since been generalized down the rank hierarchy. A sample of internal documents from a national ministry, a provincial organization department, and a university reveal a standardized regime for private foreign travel (Zhongnan University of Economics and Law, December 4, 2015; National Public Complaints and Proposals Administration, April 1, 2016; Hubei Department of Justice, January 3, 2017). Registered personnel surrender passports, Hong Kong and Macao travel permits, and Taiwan travel permits to the personnel department for centralized custody (集中保管); approval is item-by-item (一事一报); itineraries cannot be altered without re-approval; and approval for in-service deputy bureau-level cadres or above is generally not granted absent special circumstances. The situation has tightened further as rank-and-file employees in some units must now sign confidentiality undertakings or provide in-house guarantors before personal travel (Voice of America, October 23, 2023).
The April 2026 regulations expand this doctrine. Article 16 of Order No. 834 and Article 17 of Order No. 835 each explicitly list exit bans among the permissible administrative measures against organizations and individuals—including foreign nationals—that fail to comply with supply chain security obligations or that resist countersanctions enforcement (Xinhua, April 7; April 13). Both routes operate without judicial process and a criminal predicate requirement, reflecting an extension of instruments once reserved for cadres and judicial defendants to the much broader population of foreign business personnel (Safeguard Defenders, May 5). The Manus exit bans, imposed under the Exit and Entry Administration Law during the NDRC’s foreign-investment security review, demonstrate the scope of its application: personal mobility controls extend to private-sector executives and foreigners alike.
Capital Outflow Channels Tighten on Multiple Fronts
In the last two years, the traditional outbound capital channel—the State Administration of Foreign Exchange (SAFE) quota and approval system administered under the Foreign Exchange Administration Regulation (外汇管理条例)—has tightened asymmetrically, constraining private and individual outflows while leaving state-led channels open. As last amended in April 2024, the regulations cap individual foreign exchange purchases at $50,000 per person per year, require a declared purpose, and prohibit overseas real estate and equity investment, with violators subject to suspension of exchange rights (SAFE, April 30, 2024). For enterprises, outbound direct investment requires sequential NDRC, Ministry of Commerce (MOFCOM), and SAFE clearances before funds can be remitted; and investments in real estate, hotels, and entertainment are classified as restricted categories subject to discretionary refusal (State Council General Office, August 18, 2017). In 2024, soaring individual demand for offshore assets ran into Qualified Domestic Institutional Investor (QDII) quota limits, with foreign asset managers rationing access as allocations fell short. [1]
By contrast, state-aligned outbound investment continues to flow on materially easier terms. Deals by central state-owned enterprises (央企), policy-bank-financed vehicles, and projects tied to the One Belt One Road (OBOR) initiative pass through a streamlined approval track. Encouraged-category projects in energy, resources, infrastructure, and advanced manufacturing receive NDRC and MOFCOM clearance on an expedited basis under the 2017 State Council guidance, while the restricted-category sectors that primarily attract private capital, namely real estate, hotels, entertainment, and sports clubs, remain subject to discretionary refusal (State Council General Office, August 18, 2017). The 2024 outbound flow figures reflect the resulting tilt toward state-aligned destinations: of the roughly $144 billion in non-financial outbound direct investment, just over a quarter went to OBOR counterparties alone, with investment in this corridor growing nearly 23 percent year-on-year, more than double the overall non-financial ODI growth rate of 10.5 percent (MOFCOM, September 8, 2025).
More consequential than the calibrated tightening of legal quotas is the closure of one of the principal informal routes that had absorbed unsanctioned outflows. Beijing has now fully prohibited the cryptocurrency leg of the underground-banking architecture, eliminating what was once a legal gray area through which large volumes of unsanctioned capital had moved. Previously, a Chinese resident looking to send money outside the PRC typically would transfer renminbi (RMB) domestically to an “underground banker” (地下钱庄) who would arrange, through cooperating offshore networks holding stablecoins or other digital assets, the corresponding payment in U.S. dollars or another foreign currency to a designated overseas account, thus circumventing the foreign-exchange quota (TRM Labs, February 12, 2024). A 2021 prohibition on cryptocurrency trading and mining got rid of domestic exchanges and miners but left the underground-banking and offshore-stablecoin architecture largely operational, as two recent U.S. government reports have separately documented in the case of cooperation with Mexican drug-trafficking organizations (SAFE, September 24, 2021; U.S. Department of State, March 2025; Government Accountability Office, December 2025).
In response, the People’s Bank of China (PBOC), together with seven other ministries and regulators including NDRC, MOFCOM, and SAFE, on February 6 issued the Notice on Further Preventing and Handling Risks Related to Virtual Currencies (关于进一步防范和处置虚拟货币相关风险的通知) (PBOC, February 6). The notice extends prohibitions in three directions. First, it prohibits the tokenization of real-world asset. Second, it bars any domestic or foreign entity—including overseas branches of domestic firms—from issuing offshore stablecoins pegged to the RMB without regulatory authorization. Third, it asserts extraterritorial application against foreign entities providing virtual currency-related services to PRC residents (Han Kun Law Offices, February 10; Beijing DHH Law Firm, March 20). Enforcement of the measure is helped by the centrally-controlled and fully traceable digital RMB, which started to bear interest on January 1 (People’s Daily, January 1). Sanctioned outbound channels remain regulated and quota-limited, while previous gray-zone channels have formally been prohibited, even if enforcement against underlying peer-to-peer flows remains a separate question.
Technology Export Licensing Expands Around Frontier Sectors
The Catalogue of Technologies Prohibited or Restricted from Export (禁止出口限制出口技术目录), maintained jointly by MOFCOM and the Ministry of Science and Technology (MOST), is the central instrument governing outbound technology flow under the 2020 Export Control Law (出口管制法) and the Regulations on the Administration of Import and Export of Technologies (技术进出口管理条例). Items on the prohibited list cannot leave the PRC under any circumstances; items on the restricted list require a Letter of Intent on Technology Export Licensing from MOFCOM affiliates at the provincial level before negotiations and a separate export license before transfer (National Database of Laws and Regulations, November 29, 2020).
The catalogue was last comprehensively revised in late 2023 (MOFCOM, December 21, 2023). The single new prohibited item was human cell cloning and gene-editing technology; the three new restricted items were crop heterosis utilization technology, bulk material loading and unloading transportation technology, and LiDAR systems above defined thresholds. A further set of modifications, concerning lithium-extraction and gallium-extraction technologies, was issued on July 15, 2025 (MOFCOM, July 15, 2025). Three months later, MOFCOM announced a separate and more consequential set of measures on rare earth-related items and technologies, asserting extraterritorial jurisdiction over PRC-origin rare earth content above a 0.1 percent value threshold (MOFCOM, October 9, 2025). Separately, on July 31, 2023, MOFCOM and the General Administration of Customs imposed export controls on selected unmanned aerial vehicle (UAV) engines, payloads, and counter-UAV systems, including a two-year temporary control on certain consumer-grade UAVs (MOFCOM, July 31, 2023).
The catalogue alone is not the constraint on outbound technology flow. As the Manus case demonstrates, a complementary mechanism exists in which the foreign investment security review framework substitutes for any specific catalogue entry. The case nonetheless turned on the firm’s model architecture, training data, and engineering know-how having been developed inside the PRC and therefore treated as subject to PRC jurisdiction even after Butterfly Effect’s (北京蝴蝶效应科技) mid-2025 change of company domicile and relocation of approximately 40 core technical staff to Singapore (The Paper, December 30, 2025; Xinhua, January 8). [2] No catalogue entry on AI agent architectures was cited; instead, the security review considered the technology, data, and capital aspects of the case under the 2020 Measures for the Security Review of Foreign Investment. The case was the first publicly announced refusal by NDRC under that mechanism since its establishment in 2011 (Institute for National Defense and Security Research, April 30). Precedent matters because it establishes that the instruments of pre-approval, security review, and individual exit ban can be combined to retain a piece of technology even where, formally, no specific catalogue item has been triggered.
Cross-Border Information Channels Close at Both Ends
The state has recently tightened control over both ends of the cross-border information channel: the inbound flow of corporate and academic data to overseas users, and the outbound flow generated through foreign-firm operations and data-handling activities inside the PRC. Beginning in early 2023, the principal databases used by overseas analysts for due diligence on Chinese companies, the corporate registry aggregators Qichacha (企查查) and Tianyancha (天眼查), and the financial data platform Wind Information (万得), began restricting overseas access to filings, ownership structures, and litigation records, requiring mainland Chinese mobile numbers and IP addresses for verification (Bloomberg, May 3, 2023). In March 2023, the operator of the China National Knowledge Infrastructure (CNKI), the country’s largest academic database, suspended access for more than a dozen overseas universities and research institutions, citing compliance with the Cyberspace Administration of China’s (CAC) Measures on Data Cross-Border Transfer Assessment (数据出境安全评估办法) (CAC, July 7, 2022; Nikkei Asia, March 23, 2023). Overseas users were thereby detached from much of the routine corporate, financial, and academic information they had previously accessed from outside the country.
Enforcement has also reached the in-country generation of information by foreign firms. The 2023 amendment to the Counter-Espionage Law (反间谍法) substantially broadened the definition of espionage to include the acquisition of “documents, data, materials, and items concerning national security and interests” (关系国家安全和利益的文件、数据、资料、物品) (SPP, April 26, 2024). Under that umbrella, in 2023, state security and police authorities raided the Beijing office of the U.S. due diligence firm Mintz Group and detained Chinese employees, questioned staff at the Shanghai office of Bain & Company, and conducted multi-jurisdictional actions against the expert-network firm Capvision Partners (凯盛融英) (China Brief, October 20, 2023). The April 2026 supply-chain regulation places this enforcement pattern on a permanent administrative footing. Article 13 of Order No. 834 provides that any organization or individual who, in violation of PRC laws, administrative regulations, departmental rules, and relevant state provisions, “carries out, inside the territory of the PRC, investigations or other information-collection activities related to industrial and supply chains” (在我国境内开展与产业链供应链相关的调查等信息收集活动) shall be subject to handling measures by the relevant authorities. In practice, this captures the audits multinationals must conduct to satisfy the U.S. Uyghur Forced Labor Prevention Act (UFLPA) or the European Union Corporate Sustainability Due Diligence Directive (CSDDD). Article 15 authorizes investigations into foreign organizations and individuals whose conduct causes substantial harm to PRC supply-chain security; based on the investigation, authorities may bar the foreign party from PRC-related trade and investment, prohibit Chinese counterparties from transacting with it, deny entry to its personnel, and revoke residence qualifications. Article 16 extends compulsion onshore, by making PRC entities that fail to comply with such measures potentially subject to data-export bans and exit bans (Xinhua, April 7).
The formal data-export regime is exemplified by the 2021 enforcement action against ride-hailing platform Didi Global. Two days after Didi listed on the New York Stock Exchange (NYSE) in late June that year, CAC announced a cybersecurity review and ordered the company to suspend new user registrations (CAC, July 2, 2021). One year later, CAC fined Didi $1.2 billion, citing illegal handling of personal information and “data-processing activities seriously affecting national security” (严重影响国家安全的数据处理活动), with the latter withheld from public disclosure on national-security grounds (CAC, July 21, 2022). Didi delisted from the NYSE in mid-2022. The architecture has since been formalized in CAC Order No. 11 of 2022 and CAC Order No. 16 of 2024 (CAC, July 7, 2022, March 22, 2024). Together with database restrictions and supply-chain regulation, this regime converts information itself into the fourth controlled factor, alongside persons, capital, and technology. As a result, what Chinese residents and PRC-domiciled data may convey to the outside world is now subject to discretionary state authorization.
Conclusion
The asymmetric closed-door strategy stands in stark contrast to traditional autarky. Rather than restricting all cross-border flows, the state has bifurcated its approach. The underlying core factors of production are now retained under a single security-driven framework. This diverges from older outbound instruments for tangible resources, such as the critical minerals export-licensing regime, which is calibrated to produce foreign dependence rather than domestic retention.
Under this model, the PRC remains active in pushing manufactured exports and non-sensitive services out of the country to keep earning foreign exchange and bind global supply chains to Chinese producers. At the same time, however, the factors that generate wealth and innovation, elites, highly mobile capital, future-defining frontier technology and intellectual property, and the granular information that reveals an industry’s hand, have without exception been labeled national-security assets. As such, they are subjected to mandatory retention, and required, in the regime’s own logic, to stay home. The downstream effect is a one-directional decoupling. Foreign firms, regulators, and investors retain exposure to PRC markets but lose the people, capital, technology, and granular information needed to assess that exposure accurately. Over time, this asymmetry will raise the cost of any policy response calibrated to conditions inside the PRC, from export controls and investment screening to forced-labor compliance audits, while leaving Beijing’s outbound commercial channels intact.
Notes
[1] Launched in 2006, the Qualified Domestic Institutional Investor (QDII, 合格境内机构投资者) scheme allows licensed PRC financial institutions—banks, securities firms and fund managers, insurers, and trusts—to convert onshore funds into foreign currency within an aggregate quota set by the State Administration of Foreign Exchange (SAFE) and invest the proceeds in approved offshore securities on behalf of domestic clients. SAFE has continued to issue new quotas in tranches, including just over $3 billion in June 2025 and a further $5.3 billion across 78 institutions in late March 2026, bringing the cumulative approved quota to more than $176 billion as of the end of April 2026. Pacing, however, remains discretionary and well below market demand, as reflected in persistent onshore premiums and recurring purchase caps on QDII-linked funds (STCN, January 15; SAFE, April 30).
[2] Butterfly Effect is the name of the company that developed Manus (Baidu, accessed May 11).