Move establishes framework for risk monitoring, emergency reserve status

China has enacted its first comprehensive regulation dedicated to safeguarding its industrial and supply chain security, a legal milestone that analysts say will help counter external technological containment efforts and shape a more resilient economic environment.

The new regulation is not about decoupling, they added, but rather a well-calibrated response to global supply chain disruptions caused by certain economies, as Beijing continues to champion open global markets and freer trade.

The rule, which took effect immediately upon promulgation late last month, establishes a framework for risk monitoring, emergency reserves and retaliatory measures against foreign sanctions, said an official statement on Tuesday.

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The new regulation fills a critical gap in China's legal architecture, the Ministry of Justice said in a statement on Wednesday, adding that although existing laws cover emergency response strategies, export controls and countermeasures, there has been no specialized rule specifically addressing industrial and supply chain security.

According to the regulation, relevant departments will compile and continuously update lists identifying sectors deemed "critical". For these designated areas, authorities will ensure "stable production and circulation of raw materials, technology and equipment".

Information sharing mechanisms will be established among companies, and early warnings will be issued when vulnerabilities pose a threat to economic or national security.

Relevant departments will also establish "tangible reserves" — physical stockpiles of critical materials, equipment and products — while strengthening "capacity reserves" through intensified research and development efforts.

China, despite having the world's most complete industrial system, still faces vulnerabilities in such areas as core components, critical basic materials, high-end equipment and foundational software, said Wang Minghui, director of the Research Office of the Department of Industrial Economy, which is under the Development Research Center of the State Council.

"The goal is to move from reactive crisis management to proactive risk prevention," Wang said, adding that the regulation provides a legal framework for coordinating government and industry efforts.

The regulation arrives as Beijing navigates an increasingly fractious global industrial and supply chain landscape marked by export controls, unilateral tariffs and "friend-shoring" initiatives.

Global value chains have entered an era of structural volatility, according to a January World Economic Forum report, which said that in 2025 alone, tariff escalations between major economies reshuffled more than $400 billion in global trade flows.

Moreover, the United States, through the Export Administration Regulations, has imposed a unilateral blockade on China's access to advanced chips and semiconductor equipment. The European Union, meanwhile, has advanced its Critical Raw Materials Act and Net-Zero Industry Act, pushing for localized production of strategic goods.

"The regulation is partly intended to establish an institutional countermeasure tool on a reciprocal basis, rather than merely focusing on domestic industrial protection," said Shi Shenchang, an attorney from the Shanghai-based Co-Effort Law Firm.

According to the regulation, government departments have been authorized to "launch investigations" against countries, regions or international organizations that impose discriminatory restrictions on Chinese industrial and supply chains in breach of international law and basic norms of international relations.

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Authorities may also then take countermeasures, including but not limited to prohibiting or restricting the import or export of relevant goods, technologies or international trade in services, and imposing special fees.

"This is not about decoupling," Wang said.

"It is about ensuring that when others play by unfair rules, China has the legal means to protect its economic lifelines."

China will uphold the principles of equality, mutual benefit and win-win cooperation, intensify international collaboration on industrial and supply chains, and actively participate in the formulation of relevant global rules, as highlighted by the regulation.

Contact the writers at wangkeju@chinadaily.com.cn