China has established legal grounds to impose direct retaliatory measures, including banning transactions within China, against countries that threaten its supply chain security. The move is interpreted as signaling Beijing's intent to manage its supply chains at the national security level in response to the de-China push led by the Donald Trump administration in the United States.
According to state-run Xinhua News Agency on Wednesday, an executive order titled "Regulations on Industrial Supply Chain Security," signed by Premier Li Qiang, was promulgated the previous day and took effect immediately. This marks the first time China has issued a law directly governing supply chain security.
The regulations focus on building a supply chain security framework centered on key industries such as semiconductors and industrial machinery. The state is required to establish risk monitoring and emergency response systems and stabilize supply chains through emergency material mobilization and coordination measures when necessary. Companies are also required to pursue supply chain diversification and manage supply chain risks in cooperation with the government when needed. Wang Minghui, director of the Industrial Economics Research Office at the Development Research Center of the State Council, assessed the regulations as "a key measure to counter containment by the United States and the West and to proactively shape the external environment."
The regulations also grant government agencies the authority to initiate security investigations when foreign countries or international organizations undermine China's supply chain security. Sanctions can be imposed on foreign organizations and individuals that violate market rules and suspend normal transactions with China. Specifically, permitted retaliatory measures include restricting exports, imports, and technology or service transactions; restricting investment and business activities of specific countries or companies; and banning transactions with companies within China.
Governments around the world are increasingly distancing themselves from Chinese companies under the pretext of security, with the United States behind these moves. A representative case occurred late last year when the Dutch government stripped Chinese company Wingtech of its controlling stake in automotive semiconductor manufacturer Nexperia, citing security concerns. Cameron Johnson, senior partner at Shanghai-based consulting firm Tidal Wave Solutions, said, "This measure formalizes China's shift toward viewing supply chains not merely as economic factors but as national security assets."