China Overhauls Foreign Trade Law
Amid global trade restructuring, China has updated its Foreign Trade Law for the first time in over two decades. The revisions aim to balance the country's goals of economic openness with national security concerns. The move is a significant policy shift that will impact companies navigating supply chains and tariffs in the region.
The law now explicitly elevates "maintaining national sovereignty, security, and development interests" as a core purpose, shifting from its previous focus on trade promotion. This change suggests trade policies will increasingly be viewed through a national security lens, authorizing restrictive measures against overseas individuals and entities under specific circumstances. The Ministry of Commerce (MOFCOM) is empowered to act against foreign entities that "endanger the sovereignty, security, and development interests of China" or "discontinue normal transactions" with Chinese companies, seriously harming their rights. This codifies a legal toolkit for countermeasures against foreign sanctions and trade restrictions, moving beyond prior high-level provisions. For the first time, the law establishes a legal framework for a negative-list system for cross-border trade in services, formalizing a practice China has been piloting. It also introduces dedicated provisions to support emerging trade models like cross-border e-commerce and digital platforms, which have expanded rapidly in the last decade. The revision also adds a new chapter on intellectual property, enhancing protections related to foreign trade and banning the import of infringing goods. It specifically targets IP licensing behaviors like portfolio bundling and certain clauses tied to standard-essential patents as risks to the trade order. New articles promote green and digital trade, encouraging the import and export of low-carbon products and the international mutual recognition of digital certificates and electronic signatures. The law also mandates that government departments conduct compliance assessments of new trade-related policies against internationally accepted rules. This marks the second major overhaul of the Foreign Trade Law, which was first enacted in 1994 and significantly revised in 2004 following China's accession to the World Trade Organization (WTO). The latest changes, effective March 1, 2026, were approved by the Standing Committee of the National People's Congress.
