1. Overview of recent regulatory developments
In March and April 2026, the State Council of the People’s Republic of China issued two decrees relevant to supply chain governance and cross-border compliance:
• State Council Decree No. 834 (Regulations on the Security Management of Industrial and Supply Chains) /《国务院关于产业链供应链安全的规定》
• State Council Decree No. 835 (Regulations on Countering Unjustified Extraterritorial Application of Foreign Laws and Measures) /《中华人民共和国反外国不当域外管辖条例》
Decree No. 834 is the primary regulation governing supply chains. The Regulations reflect a broader policy direction aimed at strengthening supply chain resilience, enhancing security oversight, and reinforcing data and control protections in strategically important sectors.
2. Key regulatory themes
The regulatory framework emphasizes:
• Integration of supply chain security into the national security framework
• Establishment of supply chain monitoring, review, and investigation mechanisms
• Authority to address activities perceived as undermining supply chain security
• Enhanced protection of key industries, technologies, data, and supply chain-related information
The overall direction indicates a stronger focus on supply chain control, traceability, and information sensitivity.
3. Key interpretive focus for stakeholders
Based on the Ministry of Justice Q&A – State Council Decree No. 834, the Regulations represent China’s first dedicated legal framework governing industrial and supply chain security, filling a prior legislative gap. They reflect a policy shift toward integrating development with security considerations, particularly in strategically important sectors.
A key feature is the establishment of a key-sector management system, under which critical industries will be identified and subject to enhanced oversight. For these sectors, authorities will implement coordinated mechanisms for information sharing, data security protection, risk monitoring and early warning, and emergency response. The framework also promotes strategic capacity building, including physical reserves, technological development, and supply chain redundancy.
The Regulations further establish a comprehensive risk prevention and response system, including structured risk assessment, monitoring, and early warning mechanisms. In cases where foreign states, organizations, or individuals impose discriminatory or restrictive measures affecting China’s supply chains, the government is empowered to initiate investigations and adopt countermeasures. These may include restrictions on trade in goods, technology, or services; limitations on investment; suspension of transactions; and entry or residence restrictions, consistent with relevant Chinese laws.
In addition, the Regulations introduce supply chain information security requirements, prohibiting unauthorized data and information collection activities related to industrial and supply chains within China. Enterprises and research institutions are required to strengthen internal controls over core technologies, data, and information systems. Relevant authorities will provide guidance, supervision, and training, while companies and industry associations are encouraged to report risks affecting supply chain security.
4. Increased compliance requirements for Due Diligence and Supply Chain Background Research
In view of the issuance of the Regulations, we suggest that relevant stakeholders consider the following precautionary and compliance arrangements:
• Carry out thorough PRC legal reviews ahead of field operations
• Constrain the scope of information collection and questionnaires
• Strengthen restrictions over sensitive research domains
• Strictly enforce data localisation rules and cross-border data transfer regulations
• Assign more China-based personnel to undertake interviews and on-site research
At the same time, the Regulations remain largely principle-based, with detailed implementation rules and enforcement practices still evolving.
By Icey Xu, Chief Operating Officer