China: New rules on supply chain security and measures to counter extraterritorial jurisdiction

The Chinese government has recently introduced two new rules – Decree 834 and Decree 835 – to help enhance supply chain security and to push back against attempts to exert foreign extraterritorial jurisdiction over Chinese affairs. These new rules take immediate effect and have already been enforced in relation to an investigation by the European Commission into subsidies. In some cases, this may leave businesses between a rock and a hard place, having to balance foreign extraterritorial requirements against these new Chinese law countermeasures. 

From an ESG perspective, these rules are relevant for multinationals conducting supply chain due diligence — for instance, under the EU Corporate Sustainability Due Diligence Directive. Also, ESG and sustainability-related data aggregation platforms and their users, including quant funds and other investors, are also within scope to the extent their data handling processes involve information gathered from Chinese supply chains.

In our briefing, we consider what businesses should do in practice to thread a path between these competing demands.