The Slow Erosion of Rule of Law in Tech Geopolitics, When Strategic Imperatives Trump Legal Frameworks
An attempt by Meta Platforms to acquire Manus, an artificial intelligence start-up, and its subsequent blocking by Chinese authorities, marks more than a routine regulatory intervention. It signals a deeper shift in how states are exercising power over global technology flows, not merely to regulate markets, but to shape them in alignment with strategic and political priorities. Taken in isolation, China’s move is consistent with its long-standing emphasis on digital sovereignty. When viewed alongside recent US actions against TikTok, however, a more concerning pattern begins to emerge: the gradual sidelining of rule-based processes in favour of discretionary state power.
This article examines the converging interventionist approaches of the United States and China, the erosion of predictable legal frameworks in tech geopolitics, the implications for global technology firms and cross-border investment, and the complex challenge this poses for countries like India.
Part I: China’s Tight Control – Digital Sovereignty as Doctrine
For years, China has maintained a tightly controlled technology ecosystem, justified on grounds of national security, data governance, and political stability. The reported decision to block Meta’s acquisition of the Chinese AI start-up Manus fits within this broader framework. China’s regulatory authorities routinely vet cross-border deals, particularly those involving sensitive technologies like artificial intelligence, semiconductors, and data infrastructure.
China’s approach is explicit and consistent. Foreign firms operate under clear rules: technology transfer may be required, local partnerships may be mandated, and any deal that touches on strategic sectors is subject to approval that can be withheld without detailed public explanation. Critics call this protectionism. China calls it digital sovereignty.
What makes the current moment distinct, however, is not China’s behaviour alone. It is the convergence of approaches across geopolitical rivals that once claimed fundamentally different philosophies of governance. The United States, historically the champion of open markets, free trade, and rules-based order, has been moving in a similar direction.
Part II: America’s TikTok Precedent – Stretching the Rules
The US offered an instructive example in its posture towards TikTok, owned by China’s ByteDance. The effort to compel divestiture of TikTok’s US operations, under the threat of a nationwide ban, was framed as a national security imperative. While such concerns may be valid, the process extended beyond established mechanisms such as the Committee on Foreign Investment in the United States (CFIUS) .
CFIUS is the formal, legal framework for reviewing foreign investments into the US on national security grounds. It has operated for decades, with established procedures, timelines, and avenues for appeal. In the TikTok case, however, the process combined executive pressure, congressional hearings, and legislative intervention in ways that raised serious questions about transparency and procedural consistency.
If the established mechanism—CFIUS—had found a national security risk, it could have recommended divestiture through its formal process. Instead, the US pursued a multi-front approach that included threats of a ban, executive orders, and legislation targeting one specific company. Legal frameworks appeared to be stretched and supplemented. When this happens, the predictability that these frameworks are meant to provide weakens.
The message to global technology firms was unmistakable: even if you comply with all formal legal requirements, you may still face politically motivated action. The rules of the game can change mid-game.
Part III: The Convergence – When Rivals Adopt Similar Methods
It is within this evolving context that China’s actions must be understood. When one major power normalises interventionist behaviour under broad and sometimes opaque justifications, it lowers the threshold for others to follow. The US, by setting a precedent with TikTok, signalled that national security can justify extraordinary measures that bypass or stretch existing legal frameworks. China, which never needed such a precedent to act, now finds its own interventionism less exceptional and more the global norm.
The result is the emergence of a global environment in which legal principles risk becoming secondary to strategic imperatives. The rule of law—at its core, the principle that decisions should be governed by transparent, consistent, and publicly known rules rather than the arbitrary will of those in power—is being slowly eroded.
This is not to suggest that economic decision-making can be insulated from geopolitical considerations. It rarely has been. The more relevant question is whether strategic interests are pursued through mechanisms that offer transparency, consistency, and recourse, or through ad hoc exercises of power that leave affected parties with limited avenues of challenge.
Institutional frameworks do exist. CFIUS, despite its limitations, provides a structured review process. The European Union’s Foreign Subsidies Regulation and Digital Markets Act provide legal certainty, even as they regulate aggressively. The problem arises when these frameworks are bypassed, stretched, or ignored in favour of discretionary state power.
Part IV: The Implications for Global Technology Firms
The implications of this erosion are far-reaching and already visible. Global technology firms increasingly operate in fragmented regulatory environments where compliance involves not only adherence to formal rules but also anticipation of political sensitivities. A deal that is legal today may be blocked tomorrow. A product that complies with all existing regulations may be banned next week.
Capital flows become more cautious. Firms that once planned cross-border mergers and acquisitions with confidence now build in contingencies for regulatory reversals. Lawyers and compliance officers, not technologists and product managers, increasingly drive strategic decisions. Innovation ecosystems risk becoming siloed, as firms avoid cross-border collaboration for fear of triggering political scrutiny.
Smaller firms are disproportionately affected. Large corporations like Meta and ByteDance have the resources to navigate complex, unpredictable regulatory environments. They can hire armies of lawyers, lobbyists, and public relations firms. A start-up seeking an exit through acquisition cannot. The uncertainty that now pervades tech geopolitics creates a barrier to entry that favours incumbents and punishes newcomers.
Part V: The Challenge for India – Balancing Openness and Strategic Caution
For India, the erosion of predictable regulatory norms presents a complex and difficult challenge. India has long positioned itself as a beneficiary of global technology flows. Its IT services industry, start-up ecosystem, and digital public infrastructure have thrived on openness, talent mobility, and cross-border investment. At the same time, India has legitimate national security concerns, particularly regarding Chinese technology firms and data localization.
Balancing openness with strategic caution becomes more difficult in an environment where major powers themselves appear to be redefining the boundaries of acceptable intervention. If the US and China can stretch or bypass legal frameworks in the name of national security, India may feel compelled to do the same. But if India does so, it risks further eroding the very predictability that has made it an attractive destination for technology investment.
India has so far taken a measured approach. It has banned some Chinese apps, imposed data localization requirements, and scrutinized foreign investments, but largely within established legal frameworks. The challenge will be to maintain this discipline as global norms weaken.
Part VI: The Way Forward – Reclaiming Rule-Based Processes
The gradual sidelining of rule-based processes in favour of discretionary state power is not irreversible. Institutional frameworks exist. The question is whether major powers will choose to use them transparently and consistently.
For the United States, this means returning to CFIUS as the primary mechanism for reviewing foreign investments, rather than resorting to executive pressure and ad hoc legislation targeting specific companies. If CFIUS needs reform, reform it—but do not bypass it.
For China, this means providing greater transparency in its approval processes. Foreign firms are not asking for special treatment; they are asking for predictability. A clear, publicly available set of criteria for blocking acquisitions would be a step forward.
For India, this means strengthening its own institutional frameworks, such as the National Security Council and the Ministry of Electronics and Information Technology, to ensure that technology-related national security decisions are made transparently and consistently, not on an ad hoc basis.
For all countries, this means recognizing that the erosion of the rule of law in technology governance will ultimately harm everyone. A world where every cross-border deal is subject to arbitrary state discretion is a world where investment slows, innovation fragments, and small players lose.
Conclusion: A Pattern That Will Not Fade
The Manus episode may fade quickly from public attention. The broader trend it reflects will not. The convergence of US and Chinese interventionism, the stretching of legal frameworks, and the normalization of discretionary state power are not isolated incidents. They are part of a structural shift in how technology is governed globally.
The rule of law provides predictability, fairness, and accountability. It assures investors that decisions will be governed by transparent criteria rather than shifting political considerations. It enables firms to plan cross-border investments with confidence that regulatory processes will remain consistent. When state action begins to appear selective or contingent, that assurance weakens.
The effects are already visible. Capital flows are more cautious. Innovation ecosystems risk becoming siloed. Smaller firms are disproportionately affected. The question is not whether this trend exists—it does. The question is whether countries will choose to reverse it before the erosion becomes irreversible.
5 Questions & Answers Based on the Article
Q1. What two recent events does the article cite to illustrate the convergence of US and Chinese interventionism in technology governance?
A1. The article cites two events: (1) China’s blocking of Meta Platforms’ attempted acquisition of Manus, an artificial intelligence start-up, which is consistent with China’s long-standing digital sovereignty doctrine. (2) The US effort to compel divestiture of TikTok’s US operations under threat of a ban, which extended beyond the established CFIUS framework and combined executive pressure, legislative intervention, and national security justifications. Together, these events show major powers moving toward discretionary state power and away from rule-based processes.
Q2. What is CFIUS, and why does the article argue that the US approach to TikTok raised concerns about the rule of law?
A2. CFIUS (Committee on Foreign Investment in the United States) is the formal, legal framework for reviewing foreign investments into the US on national security grounds. It has established procedures, timelines, and avenues for appeal. The article argues that the US approach to TikTok raised concerns because the process extended beyond CFIUS, combining executive pressure, congressional hearings, and legislative intervention targeting a specific company. Legal frameworks appeared “stretched and supplemented,” and when this happens, the predictability that these frameworks provide to investors weakens.
Q3. According to the article, why are smaller technology firms disproportionately affected by the erosion of rule-based processes?
A3. Smaller firms are disproportionately affected because they lack the resources to navigate complex, unpredictable regulatory environments. Large corporations like Meta and ByteDance can hire armies of lawyers, lobbyists, and public relations firms to manage political risks and regulatory uncertainty. A start-up seeking an exit through acquisition cannot. The uncertainty that now pervades tech geopolitics creates a barrier to entry that favours incumbents and punishes newcomers, reducing competition and innovation.
Q4. What is the “convergence” that the article identifies as the most concerning trend?
A4. The convergence is that geopolitical rivals that once claimed fundamentally different philosophies of governance are adopting similar interventionist methods. The US, historically a champion of open markets and rules-based order, has stretched legal frameworks in its actions against TikTok. China has long maintained a tightly controlled technology ecosystem. When one major power normalises interventionist behaviour under broad justifications, it lowers the threshold for others to follow. The result is a global environment where legal principles risk becoming secondary to strategic imperatives.
Q5. What does the article suggest as the way forward for major powers like the US, China, and India?
A5. The article suggests: For the US, return to CFIUS as the primary mechanism for reviewing foreign investments; reform it if needed, but do not bypass it. For China, provide greater transparency in approval processes, including clear, publicly available criteria for blocking acquisitions. For India, strengthen its own institutional frameworks to ensure that technology-related national security decisions are made transparently and consistently, not on an ad hoc basis. For all countries, recognize that the erosion of the rule of law will ultimately harm everyone—slowing investment, fragmenting innovation, and disproportionately hurting smaller players.
