Over the past weeks, China’s State Council, issued two far-reaching regulations:

• Order No. 834 promulgated the Regulations on Industrial Chain and Supply Chain Security published and effective March 31, and
• Order No. 835 promulgated the Regulations of the People’s Republic of China on Countering Foreign Improper Extraterritorial Jurisdiction, published and effective April 7, 2026

Both regulations are distinct in their goal with one focusing on domestic economic security and the other on safeguarding overseas Chinese business interest. Importantly, both elevate existing regulations to the responsibility of the State Council (i.e., China’s highest government body) and apply a whole of government approach in its breadth through all related ministries and business entities and in depth by highlighting the responsibilities of provinces and municipalities. Both form a very strict regime to safeguard and protect Chinese economic security and business interests, in particular against foreign interference in China and abroad.

These regulations might have significant impacts on green economy and international business.

What the regulations say

Order No. 834 – security risks in industrial and supply chains

Order No. 834 aims to “prevent security risks in industrial and supply chains, enhance the resilience and security level of industrial and supply chains, and safeguard economic and social stability and national security”. It focuses specifically at “industrial and supply chains in key sectors” where key sectors have yet to be defined.

Specific considerations of the regulations are:

• Accelerate diversification of supply chains
• Strengthen international cooperation in supply chains, including international rule setting
• strengthen information sharing of the supply chains including information platform and information interconnection,
• Establish monitoring and early warning systems for supply chain security risks
• Expand physical and capacity reserves of critical technologies and resources;
• increasing public and private investment in technology as well as research and development;
• Establish an emergency management system where the State Council take control in organizing production, transportation and supply of these goods and services;
• Enterprises and research institutions should improve risk management to ensure security and accountability of core technologies, information systems, and data;

Importantly, the regulations also set out stringent rules for research and international partners:

• any organization or individual that violates Chinese laws, administrative regulations, departmental rules, and relevant national regulations by conducting investigations or other information collection activities related to industrial and supply chains within the territory of China shall be dealt with accordingly by the relevant departments in accordance with the law
• a foreign state, region or international organization that violates international law and the basic norms of international relations by taking discriminatory prohibitions, restrictions or other similar measures against China in terms of supply chains, or by implementing or assisting in actions that harm the security of China’s industrial and supply chains will be investigated by the State Council and shall receive countermeasures.

Order No 835 – extraterritorial jurisdiction

Order No 835 combines previously disparate laws on countering extraterritorial jurisdiction by foreign countries on Chinese entities (businesses and individuals) and elevates the implementation to the State council. It stresses that the implementation of the law only applies when “international law and basic norms of international relations” are violated – giving ample room for interpretation.

A “genuinely new mechanism” in the law is the extension of China’s jurisprudence to extraterritorial application over acts that have “appropriate connections with China” and “if it endangers China’s national sovereignty, security, and development interest, or harms legitimate rights and interests of Chinese citizens and organizations”. The basis for the application by China of extraterritorial jurisprudence seems significantly broader than a violation of international law.

To deal with the implementation of the law, a working mechanism for responding to undue extraterritorial jurisdiction by foreign countries should be established by China.

The law also highlights the consequences for international businesses and individuals engaging in extraterritorial jurisdiction measures against Chinese entities, including visa cancellations, investment restrictions, seizure of property (both movable and immovable). Chinese individuals and organizations can also file a lawsuit against foreign entities if they feel they were subject to “improper extraterritorial jurisdiction measures” and claim compensation for losses.

Why now?

The new orders significantly come at a time of continuous US-China tariff escalations including the seeming application of pressure from the US on countries to restrict Chinese business activities. Examples include the Netherlands taking control of Chinese-owned chipmaker Nexperia, a diversification from Chinese-owned critical minerals supply chains and shipping. It is also a direct reaction to the Panama canal dispute with the loss of control by Hong Kong based CK Hutchinson (driven by US pressure). The rules are also a consequence of the war in Iran and possibly the forced change in government in Venezuela – both of which impact Chinese owned assets.

The orders are also based on explicit ambitions of the 15^th Five-Year Plan published in March 2026 that “explicitly calls for accelerating the construction of the foreign-related rule of law system and capabilities.”

What it means for green economy

Green finance and ESG investment rely on data for environmental performance (e.g., emissions), social performance (e.g., workers’ rights) and governance (e.g., corruption) across the supply chain. Scope 2 and Scope 3 emission measurements require data from across the supply chain, including emissions from the upstream supply chain (Scope 2) and downstream supply chain and application (Scope 3). Such data are relevant for international reporting standards, such as ISSB IFRS 1 and IFRS 2, as well as for regulatory reporting requirements, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) as well as the Corporate Sustainability Due Diligence (CS3D).

Similarly, international carbon markets rely on reliable and verified emission data involving the supply chain.

Should decree 834 be narrowly interpreted to sanction any research on supply chains, any emission and other environmental, social and governance data will become unavailable.

What it means for international businesses

Several law firms have provided initial interpretations.

Decree 834: Supply Chain and Data Restrictions

Information Collection Limits Article 13 restricts foreign entities from conducting investigations or collecting data related to Chinese supply chains. This creates a direct legal conflict with international due diligence mandates, such as the EU CSDDD and the US UFLPA.

Investigative Thresholds Article 15 allows authorities to investigate foreign entities based on a threat of causing damage to supply chains. This threshold is lower than the actual harm or discriminatory conduct required under the UEL or AFSL.

Decree 835: Expanded Sanctions and Liability

The Malicious Entity List (恶意实体清单) and Piercing Rules Decree 835 targets those who promote or implement foreign extraterritorial measures. The term promote broadens the scope to include advocacy and support beyond direct implementation. Additionally, piercing rules allow countermeasures to reach entities controlled by or affiliated with a listed party, creating significant compliance risks for multinational corporate structures.

Criminal Liability Article 12 introduces potential criminal liability for individuals who violate these provisions. This marks a significant escalation from the administrative penalties found in previous regulations.

This, according to some law firms (e.g., here and here), lead to three major risk scenarios:

1. Commercial Termination Risks: Terminating Chinese suppliers or customers to comply with foreign sanctions or export controls is now a high-risk activity. Such actions trigger Order 834, and 835 simultaneously (as well as other Chinese regulations). Companies face potential administrative designation and civil litigation initiated by the terminated party. Examples include ending software updates or technical support as well as stopping supply to Chinese companies, as well as shifting supply chains away from China
2. Supply Chain Due Diligence: Conducting ESG, forced labor, or supply chain audits in China for EU CSDDD or US UFLPA compliance conflicts with information collection restrictions in Decree 834. Standard due diligence practices, such as on-site inspections and questionnaires, may be scrutinized under national security frameworks.
3. Internal Compliance Policies: Global corporate policies that mandate automatic compliance with foreign sanctions for Chinese subsidiaries may be interpreted as implementing or promoting improper extraterritorial jurisdiction. This may also include consequences for restrictions on data sharing with Chinese-facing entities⁸. These policies are subject to scrutiny under Decree 835.

Importantly, the order allows for the application for exemptions and thus the implantation of extraterritorial jurisdiction measures. This allows multi-national companies (MNCs) to address conflicting and competing legal obligations of different jurisdictions.

As the orders apply to both organizations and individuals, executives of implicated organizations could face legal exposure if they have any responsibility in the implementation of a “prohibited” measure.

Further expected developments

While similar measures and regulations have existed in China to protect national sovereignty and interest, many of them were hosted by lower-level ministries such as Ministry of Commerce (e.g., Blocking Rules in 2021 and Unreliable Entity List regime in 2020, Anti-Foreign Sanctions Law of 2021). Accordingly, the notion is that these two orders “are only a beginning”. This means that throughout the 15^th Five-Year Plan period, the “foreign-related rule of law system will continue to be refined.”