Key facts on China’s new State Council decrees

In a world where businesses have become global, the impact of policy and regulatory measures recently taken by China, the world’s second-largest economy, is significant to its international trading partners including India.

Decrees passed by China

Between March and July 2026, China’s State Council issued three regulations: Decrees Nos. 834, 835 and 837, which collectively signal a shift from fragmented ministerial oversight towards a more unified regulatory framework governing industrial security, cross-border compliance and outbound investment.

Each decree is likely to influence how Indian businesses negotiate, structure and operate commercial relationships with Chinese counterparties, particularly in the automotive, electric vehicle (EV), electronics, semiconductor, renewable energy, pharmaceutical, industrial manufacturing, critical minerals, telecoms, infrastructure and technology sectors.

China decree 834 protects supply

Decree No.834, effective from 31 March 2026, establishes China’s first comprehensive framework for protecting the security of its industries and supply chains. It authorises regulators to monitor strategic sectors and regulate information collection activities.

Businesses conducting supplier audits; Environmental, Social and Governance assessments; cybersecurity reviews; or supply chain verification involving Chinese entities should all assess whether the information sought relates to sectors or data that China regards as strategically sensitive.

China decree 835 counters extraterritoriality

Decree No.835, effective from 7 April 2026, establishes a formal mechanism enabling China to respond to foreign laws or governmental measures that it considers to constitute an improper extraterritorial exercise of jurisdiction. Chinese organisations may be prohibited from complying with designated measures without prior governmental approval.

For Indian joint ventures, this creates the possibility that conditions imposed by Indian regulators, such as audit rights, technology sharing restrictions or data localisation requirements, could constrain a Chinese partner’s ability to comply without prior approval of the Chinese government. The decree also introduces a Malicious Entity List framework for foreign parties considered to promote or facilitate such designated measures.

China decree 837 outbound investment

Decree No.837, effective from 1 July 2026, creates China’s first unified State Council-level framework governing outbound investment. Article 15 introduces a national security review mechanism operating independently of host country investment approvals. Article 13 regulates the overseas transfer of controlled technology, expertise and related resources.

Accordingly, technology licensing, technical assistance, remote support and the secondment of Chinese personnel may require additional regulatory assessment where controlled technologies or know-how is involved. The decree also empowers Chinese authorities to direct a Chinese investor to divest an overseas investment.

China decrees reshape cross-border risk

Taken together, the decrees do not curtail cross-border commerce; rather, they reflect China’s evolving approach to protecting strategic industries and national interests through ongoing regulatory oversight.

For Indian businesses going global, regulatory risk does not end once domestic approvals are obtained. Cross-border due diligence should assess continuing regulatory obligations applicable to foreign counterparties alongside Indian requirements. Joint venture, financing and technology licensing agreements should clearly allocate responsibility for obtaining regulatory approvals in both jurisdictions.

Parties should also revisit governing law, force majeure, regulatory change, termination and dispute resolution clauses to address situations where contractual performance remains lawful in one jurisdiction but becomes restricted in another.

Foreign policies and regulatory measures should be viewed as emerging legal and commercial risks to be addressed through careful transaction structuring, contractual drafting and ongoing compliance planning.

The implications of changes in the regulatory framework of foreign trading partners, including China, with whom joint ventures, technology licensing, procurement, engineering and infrastructure projects, and other cross-border commercial relationships exist or are proposed, need to be scrutinised in light of evolving policy and regulatory changes.

Samir Malik is a partner and Mahip Singh is an associate partner at DSK Legal