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China – New rules on supply chain security and measures to counter extraterritorial jurisdiction
China – New rules on supply chain security and measures to counter extraterritorial jurisdiction
21 May 2026
Series
Blogs
21 May 2026
Authors: Alex Roberts, Ellen (Qidi) Zhang and Tiantian Ke
The Chinese government has recently introduced two new rules – Decree 834 and Decree 835 – to help enhance supply chain security and to push back against attempts to exert foreign extraterritorial jurisdiction over Chinese affairs. These new rules take immediate effect and have already been enforced in relation to an investigation by the European Commission into subsidies.
In some cases, this may leave businesses between a rock and a hard place, having to balance foreign extraterritorial requirements against these new Chinese law countermeasures. We consider what businesses should do in practice to thread a path between these competing demands.
On 31 March 2026, China's State Council published the Regulations on the Security of Industrial and Supply Chains (Decree 834), followed on 7 April 2026 by the Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States (Decree 835).
Both took effect immediately and have already been enforced. On 15 May 2026, China's Ministry of Justice (MoJ) issued its first formal determination under Decree 835, finding that the European Commission's cross-border investigation into Nuctech under the EU's Foreign Subsidies Regulation (FSR) constituted improper extraterritorial application of foreign law.
These Decrees form part of a broader trend. China has been steadily building a legal framework to respond to foreign sanctions, export controls, and other measures it considers overreaching.
This framework began with the Unreliable Entity List (UEL) in 2020, followed by its Blocking Rules, and the Anti-Foreign Sanctions Law (AFSL) in 2021, and the AFSL's implementing regulations in 2025.
Decree 834 and Decree 835 elevate key countermeasures to the level of China’s highest legislative body and introduce new enforcement powers – emphasising the Chinese central government’s desire to rearm in reaction to an increasingly contested geopolitical cross-border trade environment.
Decree 834 aims to protect the security and resilience of China's industrial and supply chains. It introduces risk-monitoring and early-warning systems alongside new investigatory and enforcement powers.
Decree 835 targets foreign organisations and individuals that implement or assist in implementation of measures which the Chinese authorities consider to have been imposed through improper extraterritorial jurisdiction.
As noted above, the MoJ has issued its first determination under Decree 835, targeting the EU Commission’s enforcement of the FSR against Nuctech, a partly Chinese state-owned security inspection equipment company being investigated in the EU on suspicion of having received Chinese government subsidies that distorted competition in the EU internal market.
This determination carries significant precedential weight: it signals that similar information-gathering activities by foreign regulators — whether under the FSR, the Digital Markets Act, or other instruments — risk triggering countermeasures where they require disclosure of data or documents situated in China without a genuine jurisdictional nexus.
We have previously analysed the EU-China data disclosure dilemma arising from the Nuctech case in detail here.
Any business that restricts or severs normal commercial relationships with Chinese counterparties — whether to comply with foreign sanctions, export controls, or other regulatory requirements — faces potential exposure under these Decrees. This is the same core conduct already regulated under the UEL, AFSL, and Blocking Rules, but the new Decrees broaden the enforcement toolkit and lower the threshold for triggering an investigation. ESG and sustainability-related data aggregation platforms and their users, including quant funds and other investors, are also within scope to the extent their data handling processes involve information gathered from Chinese supply chains.
These Decrees do not fundamentally alter the risk landscape for businesses already alert to China's countermeasures framework.
The core obligations remain the same: avoid discriminatory treatment of Chinese counterparties, do not blindly apply foreign sanctions within China, and monitor list designations. The new Decrees reinforce those obligations at a higher level and introduce more coordinated enforcement.
Many key terms — including "interrupting normal transactions," "improper extraterritorial jurisdiction," and the scope of "promotion" — remain undefined. No implementing guidelines have been issued, creating uncertainty about how the regime will operate in practice.
This is not, however, unfamiliar territory. The UEL has operated without sector-specific guidelines since 2020, and the AFSL went through similar uncertainty between 2021 and the issuance of its implementing regulations in March 2025. Enforcement under both has been deliberate and geopolitically calibrated rather than indiscriminate. However, recent trends suggest an expanding scope, with non-military commercial actors increasingly in regulators' sights.
Businesses with China operations should consider the following steps:
We are actively advising clients on the implications of these new rules and their interaction with existing compliance frameworks. Please do not hesitate to contact us should you have any questions.