China acts to secure supply chains

China unveiled a detailed set of procedures for investigating threats to its industrial and supply chain security after the State Council adopted the country's first dedicated regulations on the issue in April. 

The rules for industrial and supply chain security investigations will take effect immediately upon publication, the Ministry of Commerce said in a statement on Wednesday.

They provide a framework to investigate foreign actions that may harm China's supply chain security, and lay out possible countermeasures, including trade restrictions, investment bans and sanctions, against countries, organizations or individuals found to be engaging in damaging activities.

Under the rules, the ministry may initiate investigations when foreign countries, regions or organizations impose discriminatory measures on China's industrial and supply chains, or when foreign entities disrupt normal transactions with Chinese parties, take discriminatory actions, or cause or threaten harm to China's supply chain security.

The investigations will "safeguard the legitimate rights and interests of Chinese enterprises, and uphold the stability and smooth functioning of global industrial and supply chains", the ministry said.

The rules come at a moment of heightened global competition over industrial and supply chains, 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 United States has expanded its export controls and investment restrictions on Chinese firms, and the European Union is advancing its "de-risking" agenda, Wang said, adding that China, despite having the world's most complete industrial system, still faces vulnerabilities in areas such as core components, high-end equipment and foundational software.

The rules provide a structured, legally grounded mechanism to challenge foreign discriminatory measures and impose calibrated countermeasures when needed, Wang added.

In a separate development, the ministry also unveiled a new mechanism on Wednesday to encourage public reporting of violations in the export of strategic minerals and dual-use items.

The new rules, effective July 1, are designed to "fully leverage the role of social oversight" in combating illegal and non-compliant exports of strategic minerals and dual-use items, the ministry said in an announcement.

Such acts as unauthorized exports of strategic minerals and dual-use items and circumventing export controls through third-country transshipments will be deemed as reportable violations, according to the ministry.