China introduces new rules on supply chain security and foreign extraterritorial jurisdiction

11 September 2026

Earlier this year, the People’s Republic of China (“China” or “PRC”) adopted two State Council regulations that develop its legal framework for protecting industrial and supply chain security and responding to foreign extraterritorial measures.

The Provisions of the State Council on Industrial and Supply Chain Security (State Council Decree No. 834) (“Decree 834”) took effect on 31 March 2026, establishing a framework for monitoring and responding to industrial and supply chain security risks. On 22 June 2026, the Ministry of Commerce (“MOFCOM”) issued the Measures for Industrial and Supply Chain Security Investigations (“Implementing Measures to Decree 834”), which set out detailed procedures for investigations under Decree 834.

The Regulations of the People’s Republic of China on Countering Improper Foreign Extraterritorial Jurisdiction (State Council Decree No. 835) (“Decree 835”) took effect on 7 April 2026. Decree 835 establishes mechanisms for identifying, blocking, and responding to foreign extraterritorial jurisdiction measures considered to be inconsistent with international law or harmful to China’s interests or the legitimate rights of Chinese citizens and organisations.

Together, the two Decrees further develop China’s framework under the National Security Law, Foreign Relations Law, Anti-Foreign Sanctions Law, and Foreign Trade Law. This article provides an overview of the key requirements and principal considerations for businesses operating in or dealing with China.

Decree 834: Industrial and supply chain security

Key-sector security framework

Decree 834 requires the authorities to identify key sectors for enhanced industrial and supply chain security protection and establish monitoring, early-warning, risk prevention, and emergency response mechanisms. Relevant authorities may monitor the stability of supplies of key raw materials, technology, equipment, and products and take appropriate measures where risks arise. No key-sector list has been published officially to date.

Information gathering must comply with existing PRC law

Article 13 of Decree 834 provides that where an organisation or individual conducts investigations or other information-gathering activities in China relating to industrial or supply chains in violation of PRC laws, regulations, departmental rules, or other applicable requirements, the relevant authorities may take action in accordance with law.

The provision does not prohibit ordinary commercial due diligence, supplier audits, or supply chain information gathering but instead reinforces the need for these activities to comply with existing requirements relating to matters such as data security, personal information, state secrets, trade secrets, and other protected information.

Supply chain security investigations

Decree 834 allows investigations into: (i) discriminatory supply chain measures adopted by foreign states, regions, or international organisations in violation of international law or basic norms of international relations; and (ii) conduct by foreign organisations or individuals that violates normal market transaction principles by interrupting normal transactions with Chinese parties, applying discriminatory measures or engaging in other conduct, where this causes or threatens to cause, substantial harm to China’s industrial and supply chain security.

An ordinary termination or change of supplier is therefore not prohibited merely because a Chinese counterparty is affected. The statutory test focuses on both the nature of the conduct and its actual or threatened impact on China’s industrial and supply chain security.

Implementation of Decree 834

Under the Implementing Measures to Decree 834, Chinese entities or organisations may submit evidence requesting an investigation. MOFCOM may conduct investigations by way of interview, document review, public solicitation of clues, questionnaires, hearings, technical assessments, and on‑site investigations, including outside China unless the relevant state objects. Respondents may make representations, and non-cooperation may result in MOFCOM making its determination based on available facts and information.

Measures against foreign organisations or individuals may include restrictions on China-related imports and exports, investment in China, transactions or cooperation with Chinese parties, and entry into China, cancellations or restrictions of work, stay or residence qualifications, and may extend to organisations they control or participate in establishing or operating. Organisations and individuals in China must implement the measures under Decree 834; failure to do so may result in an order to rectify and restrictions relating to government procurement and tendering, trade, cross-border data and personal information transfers, and exit or residence.

Decree 835: Countering improper foreign extraterritorial jurisdiction

Identification and blocking of foreign measures

Under Decree 835, the State Council department responsible for legal affairs - in practice, the Ministry of Justice (“MOJ”) - may formally identify and publish an announcement of a foreign measure as an “improper extraterritorial jurisdiction measure” (“IEJM”). No organisation or individual - including foreign companies and their PRC subsidiaries - may implement or assist in implementing such measure. Chinese citizens and organisations that need to do so due to special circumstances may apply to MOJ for approval within a specified scope.

Malicious Entity List and countermeasures

Decree 835 also establishes the Malicious Entity List (“MEL”). Foreign organisations or individuals that promote or participate in implementing an IEJM may be included on the MEL and subjected to measures including entry restrictions, cancellations or restrictions of work, stay or residence qualifications, asset freezes, restrictions on transactions, cooperation, data provision, imports and exports, investment, and fines. Such measures may also extend to organisations they control or participate in establishing or operating. No foreign party has been added to the MEL to date.

Authorities may investigate suspected implementation of designated measures, conduct regulatory interviews, order rectification, and issue prohibition orders. Non-compliance may result in further restrictions and fines, while affected Chinese citizens and organisations may seek cessation of the infringement and damages before Chinese courts.

Implementation to date

Decree 835 has been applied in two publicly announced cases. On 15 May 2026, MOJ identified certain cross-border investigative practices under the EU Foreign Subsidies Regulation in the investigation concerning Nuctech as being an IEJM. On 19 August 2026, MOJ made a similar determination regarding cross-border information requests to Chinese entities in the EU investigation concerning JD.com. In each case, organisations and individuals were prohibited from implementing or assisting in implementing the specifically identified measure.

These decisions are case-specific and do not constitute a general prohibition on compliance with the EU Foreign Subsidies Regulation. However, they indicate that foreign regulatory requests for information located in China may raise issues not only under PRC data-transfer and confidentiality rules but also under Decree 835.

What this means for businesses

Neither Decree requires companies to suspend ordinary compliance, due diligence, supplier audit, or ESG activities in China. The more significant practical issue, especially for multinational businesses, is how such activities are conducted and how businesses manage potential conflicts between PRC requirements and foreign regulatory obligations. Businesses should, however, consider undertaking the following:

• Review China-based information collection and overseas disclosures. Supply chain audits, investigations, and due diligence should comply with applicable PRC requirements concerning data, personal information, state secrets, trade secrets, and other protected information. China-origin information requested by overseas regulators or third parties should be reviewed before disclosure.
• Maintain contemporaneous records supporting material commercial decisions. Where a supplier, customer, or other counterparty is terminated or materially restricted, businesses should maintain objective records of the actual commercial or contractual basis for the decision, including relevant quality, cost, capacity, performance, or other business considerations.
• Identify potential conflicts before implementing foreign regulatory requirements. Group policies, contractual provisions, and regulatory response procedures should allow for PRC legal review where compliance with a foreign measure may conflict with a Chinese countermeasure or a measure designated under Decree 835.
• Monitor new designations and establish an internal escalation process. Businesses with material China operations should monitor MOFCOM and MOJ announcements concerning supply chain investigations, IEJM, and relevant countermeasure lists and ensure that significant government inquiries or potentially conflicting foreign regulatory requests are escalated appropriately.