China’s State Council Decree No. 837 enters into force on July 1 as a regulation to promote “high-quality opening-up” and support the orderly global expansion of Chinese capital. Chinese companies investing abroad will face closer state control over which technology they can transfer, who they can send to implement it, and how much know-how they can share.
Since it only affects Chinese companies, Decree No. 837 initially received less global attention than the two State Council decrees that predated it. Decree No. 834 on supply chain security and Decree No. 835 on countering improper extraterritorial jurisdiction were explicitly designed to target foreign states and companies, which saw the regulations as a direct threat. Decree No. 834 treats industrial and supply chain security as a national security issue, giving Chinese authorities a legal basis for intervening. Decree No. 835, for its part, sets out China’s response to foreign extraterritorial measures it considers improper, including countermeasures for companies or individuals.
However, the fact that Decree No. 837 is domestically focused makes it potentially more impactful. China is the world’s third-largest source of foreign investment, meaning that most countries are directly affected by the conditions imposed on Chinese investors.
