China’s new rules give the West a new headache

Key Points:

• China blocked Meta’s $2 billion acquisition of AI startup Manus, citing national security concerns, signaling Beijing’s intent to control foreign deals involving Chinese strategic assets even if structured abroad.
• New Chinese regulations on industrial and supply chain security empower Beijing to retaliate against foreign firms that reduce dependence on China, including fines and supply chain blacklisting for compliance with Western export controls.
• The EU and US have increased efforts to reduce reliance on Chinese supply chains, with the EU introducing the Industrial Accelerator Act to counter unfair competition and strategic dependencies on China, particularly amid Chinese overproduction and dumping of goods.
• Multinational companies, especially European carmakers, face a difficult balancing act between maintaining market access and production in China and responding to Western pressures to diversify supply chains away from China.
• Beijing’s approach is seen as an “extraterritorial toolbox” complicating global trade compliance, while the EU faces internal pressure from member states with strong China ties to moderate its protective measures, risking Europe's industrial future.