China Enacts New Supply Chain Laws to Counter Sanctions

The Chinese State Council has issued two significant decrees aimed at reinforcing supply chain security and asserting jurisdiction over foreign regulations. The first decree focuses on the national security of industrial supply chains, mandating local governments to optimize and protect strategic supply chains, while the second addresses extraterritorial regulations that China deems illegitimate. This legal framework marks a shift from ad hoc responses to a more formalized approach against Western sanctions, with explicit warnings against foreign companies that comply with such sanctions.

These new regulations could significantly complicate the operational landscape for foreign businesses in China. The decrees not only threaten sanctions against companies disregarding Chinese law due to foreign regulations but also formalize the mechanism for negotiation between Chinese authorities and foreign firms. As China increasingly enforces these laws, foreign businesses may find themselves navigating a complex web of compliance, balancing between U.S. sanctions and Chinese legal requirements, thus intensifying reliance on local legislation and practices.