China's New Rules Target Western Decoupling
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- Beijing's Regulations on Industrial and Supply Chain Security, introduced in April, let authorities retaliate against foreign firms that move production to countries like Vietnam or India or reshore operations, with fines and supply chain blacklisting among the tools.
- China blocked Meta's $2 billion (€1.7 billion) takeover of Singapore-headquartered AI startup Manus on national security grounds, signaling it will intervene in deals outside its borders that involve firms with Chinese roots.
- Foreign companies complying with US and EU export controls or sanctions targeting Chinese entities now face punitive measures under the new rules, which MERICS analyst Rebecca Arcesati says are 'effectively meant to derail de-risking measures.'
- The EU published details of its Industrial Accelerator Act in March to cut strategic dependencies on Chinese goods, but Beijing is lobbying to water it down — with Germany among member states pushing a more cautious approach.
- The EU's trade deficit with China hit €360 billion ($424 billion) in 2025, intensifying the stakes as Brussels faces repeated dumping of cheap Chinese goods, most recently electric vehicles, in European markets.
- German carmakers Volkswagen, BMW, and Mercedes-Benz are caught in what EU Chamber of Commerce president Jens Eskelund called an 'impossible balancing act' between protecting their China market share and complying with Western decoupling mandates.
Why it matters: Multinationals now face a trap: comply with EU industrial policy and risk Chinese retaliation, or comply with Beijing's demands and run afoul of Brussels. With the EU-China trade deficit at €360 billion and German carmakers heavily exposed on both sides, the new rules raise the cost of decoupling and give Beijing leverage to pressure Europe into softening the Industrial Accelerator Act.
