Beijing unveils two far-reaching decrees giving authorities sweeping powers to investigate foreign companies, counter Western sanctions, and hold parent firms liable for overseas subsidiary actions—signalling a new phase in US-China economic competition.
China has introduced sweeping regulations to bolster its economic defences and counter what it views as foreign overreach, marking a significant escalation in tools available for US-China competition.
New supply chain controls target foreign firms
On 7 April 2026, the State Council released the Regulations on Industrial and Supply Chain Security (Decree No. 834), granting Chinese authorities expanded powers to investigate and penalise foreign companies accused of threatening the country’s supply chain stability. Articles 13 and 15 establish new restrictions on entities conducting supply chain investigations in China, likely affecting both due diligence firms and businesses seeking to reduce their Chinese exposure.
Unlike previous measures that responded to foreign legislative actions, these regulations target commercial activities directly. Enforcement agencies possess broad discretion in defining violations, creating substantial uncertainty for foreign businesses operating in the Chinese market.
Extraterritorial jurisdiction and the “malicious entity list”
On 13 April 2026, the State Council unveiled the Regulations on Countering Foreign Improper Extraterritorial Jurisdiction (Decree No. 835). This framework enables China to assert jurisdiction over activities with an “appropriate connection” to the country in the name of national security.
The regulations introduce mechanisms, including a “Malicious Entity List,” aimed at individuals and companies that comply with US and allied sanctions. Legal experts highlight the inclusion of “piercing rules” that allow authorities to hold parent companies accountable for subsidiary actions occurring outside Chinese territory. These provisions are designed to discourage compliance with US sanctions and export controls.
Strategic intent behind economic statecraft
China is reinforcing its economic security framework and expanding countermeasures against US sanctions and “long-arm jurisdiction” as part of broader efforts to strengthen its position in ongoing trade, technology, and supply chain tensions with Washington, while also increasing leverage over American companies operating in China.
