Expanding Tools Control Foreign-Related Economic Activity
Arran Hope
Executive Summary:
Beijing is tightening controls on who and what are allowed to leave the People’s Republic of China (PRC), in part to prevent entities, particularly those with overseas operations and particularly those in critical sectors from moving beyond its regulatory reach.
Three new regulatory instruments have come into force since March that advance Beijing’s capacity to control and shape foreign-related economic activity. All are explicitly designed to safeguard three things: national sovereignty, national security, and the PRC’s development interests, which are broadly defined.
Penalties for entities deemed to have violated the new regulations range from visa controls (refusals, revocations, and expulsions), cancellation of residence permits and qualifications, asset seizures, data transaction restrictions, and prohibitions on cross-border trade and investment.
Over the past few years, Beijing has ramped up its legal and regulatory framework to better engage in what it calls a “foreign-related legal struggle” (涉外法律斗争) (MOJ, April 7). To General Secretary Xi Jinping, strengthening rule by law in foreign affairs is “an urgent task for promoting high-level opening up and responding to external risks and challenges” (推进高水平对外开放、应对外部风险挑战的当务之急) (Xinhua, November 28, 2023).
The release of the Chinese Communist Party (CCP) Central Committee’s recommendations for the 15th Five-Year Plan has made this urgency more acute. U.S. export and trade policies have become more unpredictable and costly since President Trump’s return to the White House in early 2025; and as the People’s Republic of China (PRC) has become increasingly reliant on exports as a source of economic growth, more focus has been given to handling economic and other relations with the rest of the world.
The recent spate of regulatory activity suggests a third motivating factor for Beijing. As its own policy environment becomes more hostile for many private sector entities, particularly those with overseas operations and particularly those in critical sectors, it must move quickly to prevent—or at least disincentivize—them from leaving.
This danger is very real. In November 2025, the European Union Chamber of Commerce in China surveyed its membership on the PRC’s export control regime. The headline takeaway was that a third of companies impacted by the controls were looking to divert sourcing away from the PRC (European Union Chamber of Commerce in China, April 14). While Western companies have been considering derisking strategies for several years, some domestic firms are now attempting to decouple, moving their entire businesses beyond the reach of the PRC’s legal and political systems.
In 2025, reports suggested that Chinese authorities sought to prevent PRC nationals employed by electronics manufacturer Foxconn from leaving the country to help establish iPhone factories in India (Rest of World, January 10, 2025). More recently, authorities appear to have prevented the founders of Manus AI from leaving the PRC. Manus, an agentic artificial intelligence startup that made headlines when it was launched in 2025, was acquired by Meta soon after. The Ministry of Commerce has claimed that it is “unaware of the relevant situation” (商务部不了解相关情况), though it has not denied implementing exit bans on the company’s founders (Xinhua, April 2). These rumored actions are now backed by an expanding set of regulatory and legal instruments, making it more likely that they will be deployed in future to prevent the outflow or critical materials, technologies, intellectual property, and talent.
The broader context was set at the most authoritative level by the 20th Party Congress report, which called for “making efforts to enhance the resilience and security of industrial and supply chains” (着力提升产业链供应链韧性和安全水平). This shift was the result of assessments following the first Trump administration that the PRC’s coercive tools were not fit for purpose, and that Beijing needed an updated toolkit of control rules, sanctions, and investment restrictions that it could rely on to foster its centrality in global supply chains and support its own domestic innovation. This led to the buildout of an unreliable entity list, the creation of blocking rules to protect domestic firms from the extraterritorial application of other countries’ laws, the hastily enacted Anti-Foreign Sanctions Law, the Tariff Law, and a whole host of cybersecurity, merger, and export control rules, reviews, and regulations (The Washington Quarterly, April 8).
More recently, the 15th Five-Year Plan, which has raised the importance of expanding opening up compared to previous plans, called for “improving the export control system” (完善出口管制体系) and “strengthening security reviews … and improving monitoring, prevention, and control mechanisms” (加强境外投资安全审查 … 健全 … 监测、防控、处置机制) for outbound investments (Xinhua, March 13; China Brief, April 4).
The last few months have also seen a flurry of more targeted laws and regulations come into force. Explicit in all of these is the emphasis on safeguarding three things: the PRC’s national sovereignty, national security, and development interests (国家主权、安全、发展利益). Many of the instruments supplement other laws beyond those mentioned above, such as the 2015 National Security Law (国家安全法) and 2023 Foreign Relations Law (对外关系法).
On March 1, a revision to the PRC’s Foreign Trade Law (对外贸易法) came into effect. Among other things, the revision bolstered the country’s trade countermeasures. It established a “negative list system for cross-border service trade” (跨境服务贸易负面清单制度), “strengthened the bottom line of security and improved risk prevention and control” (筑牢安全底线，完善风险防控), and added “national security exceptions and trade retaliatory clauses” (国家安全例外和贸易反制条款), authorizing restrictive measures against foreign entities (Hunan Provincial Party Committee Office of Foreign Affairs, March 10).
On April 7, the State Council released the “Regulations on the Security of Industrial and Supply Chains” (关于产业链供应链安全的规定). These are designed to “ensure the security and controllability of core technologies, as well as related information systems and data” (企业、科研机构等应当完善风险防控体系，实现核心技术及相关信息系统、数据的安全可控). To this end, they establish information sharing and data security mechanisms and monitoring and early warning platforms, improve emergency management systems, and develop “physical and capacity reserves” (实物储备和能力储备) in critical sectors. They also empower the government to prohibit research into domestic supply chains, prohibit or restrict the import and export of goods and technologies, and permit investigations into entities suspected of wrongdoing. These investigations can involve “inspecting or copying relevant documents and materials” (查阅或者复制相关文件、资料) and can result in prohibiting or restricting import and export activities, investments, and ingress or egress of relevant personnel from the PRC, among other penalties. They can even target organizations and individuals that only “indirectly participate” (间接参与) in acts that the regulations prohibit (State Council, April 7).
A week later, the State Council followed by releasing the “Regulations on Countering Foreign Improper Extraterritorial Jurisdiction” (反外国不当域外管辖条例). In one sweeping clause, they empower the government to “exercise extraterritorial jurisdiction over conduct having an appropriate nexus to China” (有权对与中国存在适当联系的行为实施域外管辖措施), though they leave undefined what counts as an “appropriate nexus.” For those who are judged to be implementing or assisting in implementing foreign improper extraterritorial jurisdiction measures, the regulations provide a number of “countermeasures and restrictive measures” (反制和限制措施). These include visa controls (refusals, revocations, and expulsions), cancellation of residence permits and qualifications, asset seizures, data transaction restrictions, and prohibitions on importing to, exporting from, or investing in the PRC. Key to the operation of these regulations is a new Malicious Entities List (恶意实体清单), that will publicize entities that violate the regulations (State Council Information Office, April 13). Expert commentaries on the regulations, published by the PRC Ministry of Justice (MOJ), frame them as a response to “the containment and suppression by the United States and the West” (美西方围堵遏制), and as aimed at maintaining the stability of the PRC’s external development environment (MOJ, April 7, [a], [b]).
Conclusion
The PRC has been beefing up its legal and regulatory capacity to control and shape both its own and foreign economic activity for several years. Beijing has accelerated these efforts over the last year—and especially in the last several weeks. Now that it has expanded its toolkit on paper, like Chekov’s gun, the toolkit will inevitably be deployed in due course, likely based on purely political incentives. In fact, this has already happened: In January, the PRC restricted the export of rare earth elements to Japan as a response to remarks made by the Japanese prime minister (PRC Ministry of Commerce, January 6). In the end, although Beijing frames its measures as intended to bring stability to the international economic system, these latest regulatory innovations are likely to have the opposite effect.
This article originally appeared in China Brief. Check it out here!
Arran Hope is the editor of China Brief at The Jamestown Foundation, where he also has responsibility for additional China-related publications and programming.