The case involving the Chinese security firm Nuctech illustrates the extent to which extraterritorial legal claims are increasingly shaping global trade. Under the Foreign Subsidies Regulation (FSR), the EU is investigating potential competition-distorting Chinese subsidies and is demanding extensive information on financing and state support. Beijing reacted sharply and, for the first time, officially prohibited Chinese companies from cooperating in such investigations. This is based on the new Chinese regulation against impermissible extraterritorial measures.
Companies are increasingly caught between conflicting legal systems. Compliance with one country’s requirements may simultaneously violate the laws of another. A current example is the new Chinese Regulations 834 and 835 against the unlawful disruption of normal economic and supply chain relationships. These regulations are particularly aimed at companies that, under pressure from foreign sanctions or geopolitical requirements, relocate their supply chains out of China or exclude Chinese suppliers. As a result, even the diversification or relocation of supply chains is increasingly becoming a legally sensitive issue.
With the Chinese Anti-Foreign-Sanctions Law and the Blocking Rules, Beijing can sanction companies that support foreign measures against Chinese interests. At the same time, China is imposing ever stricter controls on cross-border data transfers and increasingly treating data as a strategic national asset. The EU, too, is extending its regulatory reach beyond its borders. The EU AI Act and the GDPR also apply to many companies outside Europe as soon as their products or services affect the European market.
This creates a new geopolitical compliance risk for companies operating internationally. Companies with operations in China, Europe, and the U.S., in particular, must now simultaneously meet competing regulatory requirements. The Nuctech case therefore illustrates not only a dispute over subsidies but a fundamental shift in the global economy: law is increasingly becoming an instrument of geopolitical power.
China Intellectual Property Blog 