In the first quarter of 2026, the State Council’s Regulation on the Security of Industrial and Supply Chains (hereinafter referred to as the “Regulation”) entered into force.
The Regulation establishes a unified risk management mechanism for critical industrial chains, structured according to a clear sequence: compiling a list of critical industries; monitoring; early warning; emergency response; and countermeasures. This mechanism integrates supply chain security issues into China’s national security management system.
Key elements of the Regulations:
- List of Critical Sectors. Authorized agencies are empowered to compile and update the list of critical sectors. The primary objective for each sector included on the list is to ensure the continuity of production and the flow of raw materials, technologies, equipment, and products.
- Monitoring and Early Warning System. Government agencies are required to monitor the stability of supply chains and promptly issue risk warnings. Companies and industry associations have the right to report potential threats to local government authorities.
- Countermeasures. The law provides for the possibility of imposing trade restrictions on foreign countries or organizations that harm Chinese supply chains.
- Restrictions on Information Collection. Unauthorized collection of data on supply chains within China is prohibited. Chinese subsidiaries should exercise caution when complying with requests from foreign parent companies or government agencies if such requests go beyond the scope of normal commercial activities.
- Mandatory Compliance with Countermeasures. All individuals and legal entities within China, including foreign-invested enterprises, are required to comply with the countermeasures imposed by the State Council.
The Regulation establishes a comprehensive mechanism for protecting supply chains, granting government agencies broad powers. We recommend that foreign investors monitor the publication of the list of critical sectors and adapt their internal procedures in accordance with the requirements of the Regulation, including the implementation of mechanisms to screen counterparties against sanctions lists.
