China Moves to Shield Supply Chains and Formalize Retaliation Powers

On April 7, China formally rolled out a new regulatory framework aimed at safeguarding its industrial and supply-chain security, signaling a shift from ad hoc responses to a more systematized governance approach. The State Council decree, which took immediate effect, establishes a dedicated mechanism to assess and respond to external actions that could undermine key supply chains.

Unlike previous fragmented tools, this 18-article regulation represents the first comprehensive administrative rule in this space. It authorizes Chinese authorities to review measures taken by foreign governments, institutions, or individuals—particularly those involving discriminatory restrictions or disruptions affecting China’s industrial ecosystem—and to respond with corresponding actions.

The rules also lay out a menu of potential responses, ranging from trade and investment curbs to additional charges and restrictions on market access. Overall coordination will sit with the State Council, while implementation will be carried out by relevant agencies across foreign affairs, security, and legal domains.

According to the interpretation of China’s Ministry of Justice, the new framework is intended to close a long-standing gap in China’s legal toolkit and enhance the country’s ability to manage risks to supply-chain stability. It also reorganizes existing policy instruments into a more structured system that integrates investigation procedures, risk monitoring, early-warning signals, and emergency response mechanisms—while maintaining a broader commitment to international engagement.

Ministry of Justice Official Answers Questions on the Regulation on Industrial and Supply Chain Security

Source: Ministry of Justice | April 7, 2026

On March 31, 2026, Premier Li Qiang signed State Council Decree No. 834, issuing the Regulation on Industrial and Supply Chain Security (the “Regulation”), which took effect immediately upon release. A senior official from the Ministry of Justice responded to questions from the press.

Q: Could you briefly explain the background of the Regulation?

A: The CPC Central Committee and the State Council attach great importance to industrial and supply chain security. Xi Jinping has repeatedly emphasized the need to advance both technological and institutional innovation, address bottlenecks and vulnerabilities in supply systems, and enhance both competitiveness and security.

Recent Party plenums have also called for improving mechanisms to strengthen supply chain resilience. At the same time, a number of countries have introduced legislation and national strategies to safeguard their own supply chains.

While China already has rules in areas such as emergency response, export controls, and countermeasures, there has been no dedicated legal framework specifically for supply chain security. This Regulation is intended to fill that gap, strengthen the legal foundation, and ensure China can better respond to both domestic and external risks while maintaining stable and efficient supply chains.

Q: What is the overall approach behind the Regulation?

A: There are three main principles:

First, balancing development and security. The Regulation promotes high-quality development of industrial and supply chains, while also establishing mechanisms to manage risks.

Second, focusing on urgent priorities. It targets key sectors related to economic stability and national security, using a “small but focused” approach and ensuring alignment with existing policies.

Third, being problem-oriented. It addresses real-world challenges by establishing mechanisms for risk monitoring, early warning, and emergency response, while also introducing investigation procedures, countermeasures, and extraterritorial provisions.

Q: What are the key principles governing supply chain security work?

A: The Regulation reflects several core principles:

It follows a holistic national security approach, balancing development and security, domestic and international priorities, while promoting high-level opening-up and stable global supply chains.

It supports R&D in key technologies, strengthens core capabilities, and promotes digitalization and intelligent upgrading of supply chains.

It adheres to principles of mutual benefit and win-win cooperation, while actively participating in the development of international rules.

Q: How does the Regulation prioritize key areas?

A: Given the complexity of supply chains, the Regulation adopts a focused approach by establishing a “key sectors list.” This allows authorities to concentrate resources and coordination on areas critical to economic and national security.

For these sectors, the Regulation sets out clear requirements:

Strengthening data sharing while ensuring data security

Building risk monitoring and early-warning systems

Enhancing risk prevention through stockpiling and capability building

Establishing emergency response mechanisms, including contingency plans and rapid resource mobilization

Q: How does the Regulation address harmful foreign actions?

A: Articles 14 and 15 define two main scenarios:

First, if foreign governments, regions, or international organizations adopt discriminatory restrictions or similar measures in violation of international norms—and harm or support actions that harm China’s supply chains—relevant authorities may launch investigations and take countermeasures. These may include restricting trade, imposing fees, or adding entities to countermeasure lists under laws such as the Anti-Foreign Sanctions Law.

Second, if foreign companies or individuals violate normal market practices—such as disrupting transactions with Chinese entities or applying discriminatory treatment—authorities may also initiate investigations. Depending on the findings, measures may include restricting trade and investment, banning cooperation, limiting entry, or revoking residency and work eligibility. These measures can also apply to entities controlled or operated by the parties involved.

Q: How does the Regulation ensure information security?

A: The Regulation establishes a framework for supply-chain-related data security:

Unauthorized data collection related to supply chains within China is prohibited, and violations will be handled according to law.

Companies and research institutions are required to strengthen risk management systems to ensure control over core technologies, systems, and data, with government support through guidance and training.

Enterprises and industry associations are encouraged to report risks or incidents affecting supply chain security to relevant authorities.

In practical terms, authorities may launch security reviews under two broad conditions: when external actors introduce measures that violate international norms and discriminate against China, or when foreign firms or individuals disrupt normal commercial interactions with Chinese entities in a way that causes, or could cause, significant harm. Confirmed violations could lead to restrictions on trade, investment, or cooperation, as well as entry bans for relevant individuals.

The regulation places particular emphasis on sectors deemed vital to economic and national security. Authorities will define and regularly update these priority areas, while building a “closed-loop” governance system covering data sharing, risk tracking, early warning, and crisis management. It also explicitly prohibits unauthorized collection of supply-chain-related data within China and provides legal backing for enforcement actions.

Beyond the regulatory details, several Chinese experts interpret the move as part of a broader strategic recalibration.

Wang Minghui from the State Council’s Development Research Center argues that industrial and supply chains function as the backbone of a major economy. In his view, the new rules are a key step in responding to a more uncertain global environment, addressing technological choke points, and strengthening the legal foundation for industrial security. More fundamentally, he frames the policy as advancing a dual objective: using security to support development, and using development to reinforce security—helping China transition toward a more robust and resilient industrial structure.

Li Jin, a specialist in state-owned enterprise reform, notes that while China’s industrial base is broadly stable, weaknesses remain in higher-end segments. He sees the regulation as a targeted effort to reinforce these weak links and as a signal that China is moving into a new phase of institutionalized supply-chain governance, with implications for long-term growth quality.

From a legal standpoint, Liao Shiping of Beijing Normal University highlights that a major innovation lies in making countermeasures more specific and actionable. By linking with existing frameworks such as the Foreign Relations Law and the Anti-Foreign Sanctions Law, the regulation contributes to building a more coherent system of foreign-related rule of law. He emphasizes that the approach balances openness and security: externally, China continues to support cooperation rather than decoupling; internally, it strengthens its ability to defend against risks and respond when necessary.

Yang Daqing of the China Federation of Logistics and Purchasing underscores that the policy is not about retreating into self-sufficiency, but about enabling a higher level of openness on a more secure footing. He points to the importance of leading firms anchoring supply chains, stronger coordination across upstream and downstream players, and a combination of domestic backup capacity and diversified global landscape to enhance resilience and stability.

Taken together, the regulation not only expands China’s policy toolkit but also reflects a broader shift toward proactive, rules-based management of supply-chain risks. It calls for closer coordination across agencies, improved information sharing, more sophisticated early-warning systems, and better preparedness for potential disruptions—while signaling a willingness to respond more assertively to external pressure when necessary.

Full translation (unofficial) of the regulation:

Regulation of the State Council on Industrial and Supply Chain Security

Article 1
This Regulation is formulated in accordance with the National Security Law of the People’s Republic of China, the Foreign Relations Law of the People’s Republic of China, the Anti-Foreign Sanctions Law of the People’s Republic of China, the Foreign Trade Law of the People’s Republic of China, and other relevant laws, for the purposes of preventing risks to industrial and supply chain security, enhancing resilience and security levels, and safeguarding economic and social stability as well as national security.

Article 2
Work on industrial and supply chain security shall follow a holistic national security approach, coordinate development and security, balance domestic and international considerations, promote high-level opening-up, and facilitate the stable and smooth operation of global industrial and supply chains.

Article 3
The State shall establish and improve a working mechanism for industrial and supply chain security, and coordinate related efforts in a unified manner.

Relevant departments under the State Council—including those responsible for foreign affairs, development and reform, industry and information technology, public security, national security, rule of law, finance, natural resources, transport, agriculture and rural affairs, commerce, financial regulation, customs, market regulation, and cyberspace administration—shall, according to their respective responsibilities, undertake work related to industrial and supply chain security and strengthen coordination and cooperation.

People’s governments of provinces, autonomous regions, and municipalities directly under the central government shall, under national coordination, be responsible for industrial and supply chain security work within their respective administrative regions.

Article 4
The State shall guide the rational and orderly layout of industrial and supply chains, promote their digitalization and intelligent transformation, enhance their security and controllability, and advance high-quality development.

Enterprises are encouraged and supported to diversify supply channels, strengthen industrial and supply chain cooperation, participate fairly in market competition, and improve their capacity to prevent related risks.

Article 5
The State shall adhere to the principles of equality, mutual benefit, and win-win cooperation, strengthen international cooperation in the field of industrial and supply chains, and actively participate in the formulation of relevant international rules.

Article 6
Relevant departments of the State Council and local governments shall, when formulating relevant plans, fully consider potential impacts on industrial and supply chain security.

Article 7
The State shall strengthen security guarantees for industrial and supply chains in key sectors. Relevant departments under the State Council shall formulate and dynamically adjust a list of key sectors to ensure stable and continuous production and circulation of raw materials, technologies, equipment, and products in these sectors.

Article 8
Relevant departments of the State Council shall promote information sharing on industrial and supply chains in key sectors, strengthen platform support, guide industries and enterprises to enhance connectivity, and adopt effective measures to ensure data security.

Article 9
The State shall establish and improve a monitoring and early-warning system for industrial and supply chain security risks in key sectors. Relevant departments shall organize assessments and monitoring of the stability of supply channels for raw materials, technologies, equipment, and products, and their impact on economic and social stability and national security, identify risks, and promptly issue early-warning information.

Enterprises, industry associations, and chambers of commerce that identify situations affecting supply chain security may report them to relevant government departments at or above the county level.

Article 10
The State shall establish and improve a risk prevention system for industrial and supply chain security in key sectors. Relevant departments shall organize physical reserves and capacity reserves, increase efforts in R&D of technologies, equipment, and products, and enhance resilience.

Departments under the State Council and local governments shall adopt targeted risk prevention measures based on industry and regional characteristics.

Article 11
The State shall establish and improve an emergency management system for industrial and supply chain security in key sectors. Relevant departments shall formulate emergency response plans. Where situations arise that affect supply chain security and endanger economic and social stability or national security, emergency measures—such as resource mobilization, use of reserves, and organization of production, transportation, and supply—may be taken upon decision by the State Council or authorized departments. Where laws or administrative regulations provide otherwise, such provisions shall apply.

Relevant departments and local governments shall implement emergency measures according to their responsibilities and terminate them promptly once the situation is resolved. Relevant organizations and individuals shall cooperate with emergency measures.

Article 12
The State encourages and guides social capital investment to support scientific and technological R&D and breakthroughs in core technologies in key sectors, and to promote the commercialization of technological outcome.

Enterprises and research institutions shall improve risk prevention systems to ensure the security and controllability of core technologies, information systems, and data. Relevant departments shall provide guidance and training.

Article 13
Where any organization or individual conducts investigations or collects information related to industrial and supply chains within China in violation of laws, administrative regulations, departmental rules, or relevant state provisions, competent authorities shall take appropriate measures in accordance with the law.

Article 14
Where foreign states, regions, or international organizations, in violation of international law or basic norms of international relations, adopt discriminatory prohibitions, restrictions, or similar measures against China in the field of industrial and supply chains, and implement or assist in implementing acts that harm China’s supply chain security, relevant departments of the State Council have the authority to initiate investigations.

According to procedures, corresponding measures may be taken, including but not limited to restricting or prohibiting imports and exports of goods and technologies, international trade in services, or imposing special fees.

Relevant departments may, in accordance with the Anti-Foreign Sanctions Law and its implementing provisions, place organizations or individuals directly or indirectly involved in such actions on countermeasure lists and take corresponding countermeasures.

Article 15
Where foreign organizations or individuals violate normal market transaction principles, disrupt normal transactions with Chinese citizens or organizations, adopt discriminatory measures, or engage in other conduct that causes or threatens substantial harm to China’s supply chain security, relevant departments of the State Council have the authority to initiate investigations.

Investigations may include inquiries, review or copying of relevant documents and materials, and other necessary measures. Relevant parties shall cooperate and may present statements and defenses during the investigation.

Based on investigation results, authorities may impose measures such as restricting or prohibiting import and export activities, limiting investment in China, restricting cooperation with Chinese entities, denying entry of relevant individuals or transport, or revoking work, stay, or residence qualifications. Such measures may also apply to entities controlled or operated by the parties concerned.

Article 16
Organizations and individuals within China shall comply with measures adopted by relevant State Council departments under Articles 14 and 15.

For violations, authorities may order corrections and impose measures such as restricting participation in government procurement or bidding, limiting trade and service activities, restricting cross-border data transfers, or restricting exit or residence.

Article 17
Law firms, notary offices, and other professional service institutions are encouraged and supported to provide legal services related to industrial and supply chain security.

Article 18
This Regulation shall enter into force on the date of promulgation.