Export Restrictions: The Challenge for European Companies in China
This article was originally published in Italian on Class on 7th May 2026.
Please note that this is a courtesy translation of the Italian language article originally published on Class Issue at: https://www.classxhsilkroad.it/news/politica-economica/restrizioni-all-export-la-sfida-delle-imprese-europee-in-cina-202605071116211549
China’s export controls have emerged as one of the most pressing challenges for European—and other foreign—companies operating in the country. In April 2025, it introduced controls on the export of rare earth elements (REEs) to all countries, apparently as retaliation against the US’s liberation day’ tariffs. The initial disruption this caused pushed some global supply chains to the brink, with many European Chamber member companies suffering as a result.
To understand how we arrived here, it is worth stepping back.
Export controls are not new. The United States laid the groundwork over a century ago with the Trading with the Enemy Act of 1917, establishing the principle that states can restrict access to goods and technologies that might be used against their interests. Over time, these controls evolved into a central instrument of national security policy, aimed primarily at preventing the proliferation of weapons and sensitive technologies.
For China, the export control regime developed largely around international commitments. For example, its first use of export controls occurred in 1995 with the Regulations on the Administration of Controlled Chemicals. Throughout the 2000s, China expanded its export control regime through the introduction of various regulations governing different weapons categories, many of which brought it in line with international standards for preventing the spread of certain weapons. It was not until 2020 that the country passed its Export Control Law, consolidating a previously fragmented system into a unified legal regime. The introduction of comprehensive dual-use regulations in December 2024 marked another step toward a more structured and enforceable system.
The US has undoubtedly served as the initiator of the race to repurpose export controls for strategic aims. Measures such as the 2019 restrictions on Huawei signalled a decisive move beyond traditional security concerns, blending national security with economic and technological competition. Under successive administrations, export controls have become a strategic tool, not just a defensive one.
The European Union is also moving in this direction, albeit more cautiously. Its emerging economic security framework calls for stronger export controls to counter “hostile actions weaponising interdependencies.” Yet Brussels remains committed, at least for now, to the rules-based trading order. Its approach is likely to remain measured—an attempt to balance security concerns with economic openness.
This distinction matters, particularly for China.
As one of China’s largest trading partners, the EU represents a source of long-term economic stability. At a time when the United States is increasingly willing to weaponise economic tools, maintaining a predictable and cooperative relationship with Europe is in China’s own interest. Yet current policies risk undermining that relationship. In some cases, European companies report being more adversely affected by China’s export controls than their American counterparts—a dynamic that risks eroding trust and accelerating diversification away from China.
Recent developments only add to these concerns. China’s Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States (Regulations) released on 13th April, are framed to serve as a defensive instrument for China to protect its interests from extraterritorial provisions enacted by foreign states. However, they also explicitly affirm China’s own ability to apply extraterritorial provisions. Combined with extraterritorial export control rules, originally announced on 9th October 2025, which are set to come into force on 10th November 2026, this introduces a new layer of uncertainty for global businesses already navigating a complex regulatory environment.
For the EU, the calculation is becoming harder to ignore. If adherence to a rules-based approach results in disproportionate costs, the incentive to seek alternatives will only grow stronger. Already, a flash survey conducted by the European Chamber in November 2025 found that one-third of affected firms were considering diverting sourcing away from China.
None of this suggests that export controls are inherently problematic. Used judiciously, they remain a vital tool for limiting the spread of weapons and reducing the risk of conflict. The issue lies in their expanding role as instruments of economic strategy. When overused or applied unpredictably, they begin to erode the very interdependence that has underpinned decades of global growth.
China now faces a consequential choice.
It can take steps to ensure that its export control regime is less disruptive, allowing globalisation to continue to function, or it can allow export controls to dismantle mutually beneficial economic interdependence globally. The benefits of globalisation to China’s development have been undeniable. Preserving them will require restraint, clarity, and a renewed commitment to cooperation—before today’s warning signs become tomorrow’s irreversible shifts.
By: Avv. Carlo D’Andrea, National Vice President of the European Union Chamber of Commerce in China and Chairman of the Board of the Shanghai Chapter, Founder and Managing Partner of D’Andrea & Partners Legal Counsel
