China's New Supply Chain Security Regulations: MAC Warns Taiwanese Businesses Face a Dilemma
Taiwan's Mainland Affairs Council (MAC) warned that China's new supply chain security regulations, effective April 7, put foreign and Taiwanese businesses in China in a compliance dilemma. Companies are caught between adhering to US restrictions and Chinese laws, leading to increased IT operational costs and a more fragmented global manufacturing system.
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- 📰 Published: April 29, 2026 at 22:05
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Taipei, April 29 (CNA) — Regarding China's new regulations on industrial and supply chain security announced on April 7, Taiwan's Mainland Affairs Council (MAC) warned today that the primary impact is on foreign and Taiwanese businesses in China, creating compliance pressure and a 'compliance sandwich' dilemma. They face the challenge of either complying with relevant US prohibitions and thus violating Chinese laws, or ignoring the prohibitions and facing US sanctions.
In response to the 'Regulations of the State Council on Industrial and Supply Chain Security' announced by China's State Council on April 7, the MAC issued a press release on April 29, stating that the new regulations will affect global industrial and supply chains. This will accelerate the shift in global supply chain operational logic from cost-efficiency orientation to security-first orientation.
The MAC anticipates that to avoid triggering China's security investigations and countermeasures, multinational corporations and Taiwanese businesses will be forced to accelerate the promotion of a 'dual-track system for supply chains and IT architecture,' i.e., an 'in China for China strategy.' This isolation mechanism, arising from compliance risks, will not only increase corporate IT operating costs but also further shorten the global manufacturing system.
The MAC pointed out that the new regulations establish a 'dynamic list mechanism for key areas,' providing clear targets for China to implement asymmetrical retaliation. Beijing has already implemented tentative export controls on rare earths, gallium, germanium, and drone components. In the future, it will more actively use industries where it holds a relatively dominant position globally (such as mature process semiconductors, new energy equipment, and high-end battery materials) to implement export restrictions, delayed reviews, or impose special fees on foreign governments or enterprises that cooperate with US policies.
The MAC warned that the new regulations create compliance pressure for foreign and Taiwanese businesses in China, leading to a 'compliance sandwich' dilemma. Under the trend of dual-tracking supply chains, foreign and Taiwanese businesses deeply rooted in the mainland market are the first to be affected. Multinational entities are caught between US and Chinese control measures, facing the dilemma of complying with relevant US prohibitions and violating Chinese laws, or ignoring the prohibitions and facing US sanctions.
The MAC also warned that the new regulations increase personal safety risks for Taiwanese businesses in China. In the future, executives responsible for procurement, legal affairs, or compliance might violate these regulations when responding to headquarters' investigations or conducting production line audits. Supply chain managers or legal and compliance executives conducting on-site checks or responding to data requests from overseas headquarters could easily cross the 'illegal collection of information' red line, increasing the risk of detention or restrictions on leaving the country.
The MAC also mentioned that data decoupling might reduce the competitiveness of Taiwanese businesses in China for receiving orders. If Taiwanese businesses in China cannot provide international customers with required 'no forced labor certificates' or 'supply chain transparency reports,' they might lose international orders. It will be difficult for Taiwanese businesses to provide complete supply chain traceability reports to international customers, which could lead to international orders being lost due to failure to pass audits.
The MAC reminded Taiwanese businesses to pay close attention to subsequent developments and no longer consider issues purely from a commercial operating perspective. They must incorporate 'geopolitical and economic risk compliance' as a core element in evaluating investment and operational decisions and prudently respond to China's escalating economic and political risks. (Editor: Yang Sheng-ju / Chiu Kuo-chi) 1150429
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In response to the 'Regulations of the State Council on Industrial and Supply Chain Security' announced by China's State Council on April 7, the MAC issued a press release on April 29, stating that the new regulations will affect global industrial and supply chains. This will accelerate the shift in global supply chain operational logic from cost-efficiency orientation to security-first orientation.
The MAC anticipates that to avoid triggering China's security investigations and countermeasures, multinational corporations and Taiwanese businesses will be forced to accelerate the promotion of a 'dual-track system for supply chains and IT architecture,' i.e., an 'in China for China strategy.' This isolation mechanism, arising from compliance risks, will not only increase corporate IT operating costs but also further shorten the global manufacturing system.
The MAC pointed out that the new regulations establish a 'dynamic list mechanism for key areas,' providing clear targets for China to implement asymmetrical retaliation. Beijing has already implemented tentative export controls on rare earths, gallium, germanium, and drone components. In the future, it will more actively use industries where it holds a relatively dominant position globally (such as mature process semiconductors, new energy equipment, and high-end battery materials) to implement export restrictions, delayed reviews, or impose special fees on foreign governments or enterprises that cooperate with US policies.
The MAC warned that the new regulations create compliance pressure for foreign and Taiwanese businesses in China, leading to a 'compliance sandwich' dilemma. Under the trend of dual-tracking supply chains, foreign and Taiwanese businesses deeply rooted in the mainland market are the first to be affected. Multinational entities are caught between US and Chinese control measures, facing the dilemma of complying with relevant US prohibitions and violating Chinese laws, or ignoring the prohibitions and facing US sanctions.
The MAC also warned that the new regulations increase personal safety risks for Taiwanese businesses in China. In the future, executives responsible for procurement, legal affairs, or compliance might violate these regulations when responding to headquarters' investigations or conducting production line audits. Supply chain managers or legal and compliance executives conducting on-site checks or responding to data requests from overseas headquarters could easily cross the 'illegal collection of information' red line, increasing the risk of detention or restrictions on leaving the country.
The MAC also mentioned that data decoupling might reduce the competitiveness of Taiwanese businesses in China for receiving orders. If Taiwanese businesses in China cannot provide international customers with required 'no forced labor certificates' or 'supply chain transparency reports,' they might lose international orders. It will be difficult for Taiwanese businesses to provide complete supply chain traceability reports to international customers, which could lead to international orders being lost due to failure to pass audits.
The MAC reminded Taiwanese businesses to pay close attention to subsequent developments and no longer consider issues purely from a commercial operating perspective. They must incorporate 'geopolitical and economic risk compliance' as a core element in evaluating investment and operational decisions and prudently respond to China's escalating economic and political risks. (Editor: Yang Sheng-ju / Chiu Kuo-chi) 1150429
Choose to stand with facts, every sponsorship of yours is a force to protect press freedom.
Download CNA's 'First-hand News' APP to grasp the latest information instantly.
The text, images, and videos on this website may not be reproduced, publicly broadcast, or publicly transmitted and used without authorization.