On March 31, 2026, the State Council of the PRC issued the Provisions on Industrial and Supply Chain Security (State Council Order No. 834) (the "Provisions"), which entered into force on the same date.1
The Provisions establish a national framework for safeguarding the security and stability of China's industrial and supply chains.
Key Features
In summary, the Provisions:
- establish mechanisms for monitoring, assessing, and responding to risks affecting key industrial and supply chains;
- authorize competent authorities in China to conduct supply chain security investigations and adopt corresponding mitigation measures;
- provide a statutory basis for countermeasures in response to external actions perceived as threatening China's industrial or supply chain security; and
- are intended to operate in coordination with existing national security‑related regimes, including export controls, sanctions countermeasures, and data security laws.
While many provisions of the Provisions are directed principally at governmental coordination, the following are of particular relevance to multinational companies.
Investigations and Information Collection Activities
Article 13 of the Provisions provides that any organization or individual that, in violation of China's laws, administrative regulations, departmental rules, or relevant national provisions, conducts investigations or other information collection activities related to industrial or supply chains within China may be subject to regulatory consequences.
Article 13 does not define what constitutes an "investigation," the required degree of connection to an industrial or supply chain, or which specific "national provisions" may serve as the basis for a violation. Nonetheless, based on current enforcement trends, this provision is expected to focus on activities perceived as undermining PRC national interests, rather than imposing a blanket restriction on commercially reasonable and legitimate due diligence.
Supply Chain Countermeasures Directed at Non-PRC States and Organizations
Articles 14 and 15 establish a dual‑track enforcement framework targeting different sources of supply‑chain disruption.
- Article 14 addresses state‑level actions, empowering PRC authorities to investigate and respond to "discriminatory prohibitions or restrictions imposed by foreign states, regions or international organizations that violate international law or basic norms of international relations", with potential countermeasures closely aligned with China's existing counter‑sanctions regime.
- By contrast, Article 15 focuses on market‑actor conduct, authorizing investigations and restrictive measures against foreign companies or individuals that, "contrary to normal market‑trading principles, suspend or discriminate in commercial dealings with PRC entities in a manner that causes, or threatens to cause, material harm to China's industrial or supply‑chain security".
Following an investigation, the authorities may impose a wide range of restrictive measures on the foreign entity or individual concerned. These include prohibitions or restrictions on engaging in import or export activities involving China, bans or limits on investment within China, and measures preventing or limiting Chinese organizations and individuals from transacting or cooperating with the foreign party. In addition, the authorities may impose immigration and entry‑related sanctions, including restrictions or bans on entry of relevant personnel or transportation assets, as well as cancellation or limitation of work permits, stay or residence qualifications in China.
Of particular note, Article 15 expressly empowers authorities to apply countermeasures not only to the targeted entity or individual, but also to entities that are actually controlled by, or established or operated with the participation of, such targeted party. This provision permits enforcement measures to extend across an entire corporate group, potentially affecting controlled subsidiaries—including PRC‑incorporated entities—even where they had no direct involvement in the underlying conduct.
Where an entity or individual within China fails to comply with, or seeks to undermine, those measures, the authorities are empowered to impose sanctions directly on that domestic party. Such sanctions may begin with orders to rectify the non‑compliance, but can escalate to prohibitions or restrictions on participating in government procurement, bidding and tendering activities, engaging in goods or technology import and export or international trade in services, as well as engaging in cross-border transfer of data or personal information, among others.
Relationship With China's Counter‑Extraterritorial Regime
The Provisions expressly contemplate coordination with China's counter‑extraterritorial and counter‑sanctions framework. In practice, supply‑chain investigations under the Provisions may intersect with determinations under the Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States.
Where a foreign measure is viewed both as disrupting supply‑chain security and as an improper exercise of extraterritorial jurisdiction, authorities may have parallel legal bases for investigation and countermeasures under the two regimes.2
Practical Takeaways
The Provisions on Industrial and Supply Chain Security signal a regulatory shift toward ex ante risk monitoring and discretionary intervention in supply‑chain‑related conduct. Multinational companies with China‑linked manufacturing, sourcing, logistics, or after‑sales operations may wish to consider the following points in particular:
Supply‑chain transparency and internal alignment
Companies should assess how supply‑chain information is generated, consolidated, and escalated within their organizations. Internal processes that involve centralizing China‑related supply‑chain data outside China, or commissioning third‑party assessments that examine dependencies, bottlenecks, or substitution strategies, may attract scrutiny if perceived as touching on industrial or supply‑chain security. Alignment between global procurement, compliance, and China‑based operational teams will be important to ensure consistency in messaging and execution.
Readiness for regulatory engagement and investigations
The Provisions give authorities broad discretion to initiate supply‑chain security investigations and to request information from relevant parties. Companies may wish to prepare internal response/dawn raid protocols for inquiries relating to supply continuity, sourcing decisions, inventory management, or termination of supply relationships involving PRC entities, including clear lines of responsibility between headquarters and China‑based management.
1 Regulations on the Security of Industrial and Supply Chains (《国务院关于产业链供应链安全的规定》) (promulgated by the State Council, Order No. 834, Mar. 31, 2026, effective Mar. 31, 2026).
2 For further information about these regulations, please see here.
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