MERICS warns that China’s new economic arsenal could make reducing European dependencies more difficult

European companies seeking to reduce their dependencies on China will face a Chinese legal framework better able to investigate, restrict, or penalize actions considered harmful to the country’s economic security, according to a report published by the Mercator Institute for China Studies, MERICS. The authors interpret the new 2026 regulations as a shift from ad hoc reactions to a more institutionalized system capable of monitoring vulnerabilities, protecting technologies and industrial chains, and responding to foreign de-risking or control measures.

The wording must be distinguished from Beijing’s stated objectives. The State Council Regulation on the Security of Industrial Chains says it aims to prevent risks, increase resilience, and protect economic stability and national security, while the Ministry of Commerce presents the new investigation procedures as tools for maintaining the stability of Chinese and global chains. The idea that these instruments form an “anti-derisking” strategy toward Europe is MERICS’s interpretation of how the rules may be used, not the official wording of the Chinese authorities.

In briefThe State Council created a coordinated mechanism in 2026 to monitor and protect the security of industrial and supply chains.

The Ministry of Commerce may investigate foreign states, organizations, or companies over certain restrictions or disruptions considered harmful to Chinese chains and may propose trade, investment, or data-access measures.

Other rules adopted in 2026 strengthened mechanisms for responding to the extraterritorial application of foreign legislation and security controls over Chinese investments abroad.

MERICS considers that these instruments may increase the cost for companies seeking to move production, research, or supply capacities outside China.

The report recommends that the EU pursue diversification, stockpiles of strategic inputs, rules against dependence on a single country, and readiness to use instruments such as the anti-coercion instrument, but these are the authors’ recommendations, not new decisions by European institutions.

The most concrete change is State Council Regulation No. 834 on the security of industrial and supply chains. It establishes coordination mechanisms between ministries and local administrations, requires risk monitoring, and seeks to keep under control elements considered important for the functioning of the economy and national security. The scope may include materials, technology, finance, assets, data, information, personnel, enterprises, and projects.

In June, the Ministry of Commerce turned the general framework into a concrete investigation procedure. MOFCOM may open investigations when it considers that a state, international organization, company, or individual has imposed discriminatory restrictions, disrupted normal trade relations, or created a material threat to Chinese chains. The authority may request documents, hold hearings, conduct inspections, and, after an investigation, propose restrictions on trade, investment, transactions, data flows, or other activities.

The regulation also provides for the possibility of measures against foreign entities that interrupt transactions with Chinese organizations without a reason considered legitimate. MERICS sees a direct implication here for Western companies reorganizing their suppliers or production capacities to reduce geopolitical risks, since a commercial decision made to comply with Western rules may simultaneously be assessed under a Chinese economic-security framework.

Two other components complete the architecture. Regulation No. 835, adopted in April, creates mechanisms against what Beijing defines as the improper exercise of extraterritorial jurisdiction by foreign states, while the new rules on outbound investment allow security assessments of Chinese operations that may affect national security. The outbound investment regime also provides for obligations concerning the transfer of technology, data, capital, and other elements associated with investments.

MERICS links these rules to the instruments already used for graphite, rare earths, magnets, battery technology, and other vulnerable points in global chains. The report argues that Beijing is attempting to eliminate its own technological “chokepoints” while maintaining control over sectors in which China holds strong positions. In this interpretation, export controls, investment monitoring, and retaliation instruments can operate together and discourage the relocation of certain capacities outside China.

The authors warn that the European response has a real economic cost. Diversifying suppliers, maintaining stockpiles, signing long-term contracts with alternative producers, and building redundant capacities are generally more expensive than sourcing exclusively from the most efficient source. For this reason, the report says that individual firms are at a disadvantage if they invest first in resilience, and governments should mitigate this problem through common rules and support for alternative suppliers.

Recommendations include mandatory stockpiling of certain strategic inputs, limiting sourcing from a single country, firm purchase agreements for supply chains considered trustworthy, and improving European authorities’ access to information about companies’ exposure in high-risk states. MERICS also recommends maintaining a credible response capacity through the EU’s trade and anti-coercion instruments, without abandoning dialogue with Beijing to establish more predictable areas of cooperation.

The European Union has separately built its own economic-security policy around promoting competitiveness, protecting sensitive infrastructure and technologies, and cooperating with partners. The European framework includes screening foreign investments and monitoring certain outbound investments, but member states retain significant powers in applying the instruments.

The MERICS report does not calculate an inevitable industrial loss for Europe and cannot predict when or against whom the Chinese instruments will be used. Its contribution is to identify an economic-policy risk: reducing a dependence on China may simultaneously generate the normal costs of diversification and the risk of countermeasures by a state that has expanded its legal and administrative capacity to protect its own chains.

https://2eu.brussels/ro/news/merics-avertizeaza-ca-noul-arsenal-economic-al-chinei-poate-face-reducerea-dependentelor-europene-mai-dificila