Decoupling or de‑risking is the process by which Western companies move production out of China or reduce purchases of Chinese parts to lower dependency. You might assume Beijing has limited ability to stop that trend. Recent actions suggest otherwise.
In April, Chinese regulators blocked Meta’s roughly $2 billion takeover of the AI startup Manus, headquartered in Singapore but with deep Chinese ties. Beijing cited national security concerns and made clear that even transactions arranged outside China’s borders can be halted if the target is deemed a strategic asset. The move followed the swift rollout of the Regulations on Industrial and Supply Chain Security, which broaden Beijing’s legal reach over overseas deals and technology flows.
Those rules are meant to discourage de‑risking. Authorities can now punish foreign firms that shift factories to countries such as Vietnam or India, or that bring production back home. Companies that comply with export controls or sanctions imposed by the United States or the European Union could face fines, blacklisting or other penalties in China. In effect, the new framework gives Beijing leverage to deter governments and businesses from reducing economic ties.
Since the pandemic, Washington and Brussels have stepped up efforts to make supply chains more resilient and less reliant on China. Many multinational companies have scaled down Chinese operations or reshored production. That trend accelerated after aggressive US tariffs on Chinese goods introduced in 2025, helping push trade away from global integration toward a more fragmented, bloc‑based system.
Europe has also reacted to surges of low‑priced Chinese exports — most notably electric vehicles — by developing measures to protect its industry. In March the European Commission unveiled the Industrial Accelerator Act (IAA), a program designed to reduce Europe’s strategic dependencies and counter unfair competition by subsidized foreign rivals. While the IAA does not name China explicitly, its provisions aim to shield European supply chains and industries from distortionary practices.
These competing policy currents put multinational firms in a difficult spot. Major German carmakers, for example, want to preserve market share in China and benefit from local production there, while at the same time facing pressure at home to reduce dependence on Chinese components and to compete with fast‑growing Chinese EV manufacturers. For many companies, complying simultaneously with Chinese rules and with US or EU requirements can be impossible.
Observers say Beijing’s new powers amount to an “extraterritorial toolbox” that increases complexity for global trade. There are already reports that Chinese authorities are quietly pressuring foreign firms over plans to relocate production. The logic from Beijing’s perspective is straightforward: to secure leadership in strategic technologies, China seeks greater self‑sufficiency and wants other countries to remain reliant on Chinese supply chains.
Beijing has shown it can weaponize trade: recent export controls on rare earth elements and other critical minerals used in EVs, defense systems and advanced electronics demonstrate how tightly it can restrict inputs that many industries depend on.
At the same time, Beijing is pressing Brussels to water down the IAA, and some EU member states with close economic ties to China are urging caution. That pressure comes even as the EU’s trade deficit with China swelled to about €360 billion in 2025, underscoring Europe’s exposure.
Analysts warn that Europe must act to protect its industrial base. Others argue that if policymakers yield to threats or economic leverage, they will lose autonomy and maneuvering room over time. The result is an escalating regulatory tug‑of‑war: Western efforts to diversify supply chains and shield critical industries are meeting Chinese rules designed to keep parts of the global economy closely linked to Beijing.
For multinational firms and policymakers alike, the new Chinese regulations raise an uncomfortable choice: face penalties in China for complying with Western controls, or risk Western sanctions and political backlash for remaining tied to Chinese supply chains. That balancing act is likely to become a persistent headache for the West as both sides sharpen tools to defend strategic economic interests.