Beijing enacted new rules that threaten stiff punishments for foreign and domestic companies that shift supply chains out of China, with penalties including “exit bans” on staff and asset seizures.
The move reflects anxiety among policymakers as growing numbers of manufacturers shift production to places like India and Vietnam amid mounting geopolitical strains with the US and other Western countries.
Beijing linked the restrictions to the Iran war, arguing that US threats to sanction Chinese banks over Iranian oil purchases created “spillover risks” for Chinese companies, the Financial Times reported.
Analysts warned the measures will spike tensions with China’s trading partners, and could backfire by encouraging the very outflow of investment, talent, and technology that the legislation is intended to prevent.