China Market Intelligence

China continues to expand its retaliatory toolkit as geopolitical and trade tensions with the United States and, increasingly, the EU intensify. The tools vary in scope and severity, each with its own specific impacts on multinational companies operating in China. This primer covers the tools at China’s disposal to counter actions it perceives as inappropriate or unfair, starting with those most overtly retaliatory.

On May 11, the Standing Committee of China’s National People’s Congress and the State Council released their 2026 legislative plans, outlining lawmaking priorities for the first year of the 15th Five-Year Plan period. This year, Beijing is moving to codify broad priorities, particularly in finance, economic security, market regulation, and technology governance.

Following the Trump-Xi summit, both countries addressed several agricultural concerns. However, tariffs and non-tariff barriers continue to hinder US agricultural exports. Furthermore, official readouts are not fully aligned; China kept its recounting vague on agricultural commitments.

China has seen a series of high-level personnel changes at both the central and provincial levels in recent months, driven by appointments made around the national and local Two Sessions as well as developments in the ongoing anti-corruption campaign.

Just six days after issuing the Regulations on Industrial and Supply Chain Security (Doc. 834), China’s State Council released the Regulations on Countering Foreign States’ Improper Extraterritorial Jurisdiction (Doc. 835), another expansion of Beijing’s retaliatory toolkit. Unlike Doc. 834, which governs sectoral and commercial supply chain security and is triggered by a demonstrable harm or threat, Doc. 835 targets foreign legal pressure itself regardless of commercial impact and can therefore be invoked under a lower evidentiary threshold.

In a pivot toward greater flexibility for public healthcare institutions, central government regulators recently introduced a series of measures to provide patients with differentiated, tiered products and services based on factors like clinical value, patient segmentation, and local fiscal capacity. The shift incentivizes innovation by driving more promising returns on R&D investments.

According to official government data, China’s real GDP grew 5% year-on-year in the first three months of 2026 to 33.42 trillion yuan ($4.9 trillion), beating expectations and reversing the downward trend seen in the second half of 2025. Strong industrial output and foreign trade drove growth, but weak demand weighed on overall activity and clouds the outlook for the rest of the year.

China’s State Council issued the Regulations on Industrial Chain and Supply Chain Security on April 7, creating a mechanism to monitor and investigate supply chain risks. Investigations could lead to countermeasures against countries, companies, and other entities. While the rules don’t necessarily create new retaliatory tools, they connect China’s existing tools under one framework, embedding retaliation into China’s governance system.

Shanghai, Jiangsu, and Guangdong remain the most mentioned locations for government engagement, unchanged from the past two years and underscoring the sustained economic vitality of the Yangtze River Delta and the Greater Bay Area. Shanghai leads in overall mentions, but Jiangsu surpassed the megacity when accounting for preference strength.

China’s 15th five-year plan (FYP) suggests that industrial policy is no longer just one policy area among many but rather an organizing logic for the whole economy. Beijing is increasingly aligning domestic substitution, enterprise innovation, anti-involution, and infrastructure development around the goal of building a more self-reliant industrial system.