It’s time to get real about China’s lawfare
In the ever-evolving long-term rivalry between the United States and China, it can be easy to overlook the quieter but more persistent risks that lie beneath the headlines.
Case in point: China’s sweeping new export controls on rare-earth magnets and related technologies are tightening its grip on critical inputs for everything from electric vehicles to fighter jets. Under the new rules, any magnet containing even traces of rare earth originating from China or made using Chinese methods now requires explicit approval from Beijing for export. This marks a significant evolution in China’s export controls and should be understood as the beginning of the Chinese version of the “Foreign Direct Product Rule,” a signature tool that Washington has used for decades to assert power and control and, most relevant to China, to block the supply of semiconductors to Huawei and other Chinese firms.
But the latest push for rare earth elements involves much more than that. As attention turns to the Trump-Xi meeting, expected to be held on the sidelines of the Asia-Pacific Economic Cooperation Summit in South Korea later this month, or flashpoint issues such as Taiwan, TikTok dealThe deeper structural tensions shaping the long-term U.S.-China relationship and the rest of the international system risk taking a backseat to factors like tariffs or semiconductor competition.
Amidst the chaos created by these high-profile developments and short-term tactical deals, a trend with subtler but profound implications is emerging that deserves the continued attention of boards, CEOs, investors, and policymakers: the increasing use of what are commonly called “rules of law.” Conscious and strategic deployment of laws, compliance regimes and regulatory norms are increasingly used by China to assert its power, shape global behavior and secure long-term advantages for itself and its companies around the world.
It’s not just the laws themselves that create difficulties. Many would be right to say that the United States and Europe have been doing these things for decades. The risk comes from a serious lack of understanding of what China is doing and little curiosity or forward-looking scenario planning among U.S. boards and senior executives. Managers are often unprepared for situations where once-routine compliance with U.S. laws now conflicts with obligations under China’s expanding legal and regulatory regime. These are no longer edge case events.
And if China’s regulatory framework is relatively new compared to the United States or Europe, it is increasingly effective in advancing its geopolitical goals. Any country with China’s state capacity, agency and ambition will use its legal system to extend its influence abroad. The timing of the latest rare earth restrictions is no coincidence. With the Trump-Xi meeting expected to be held in Seoul this month, China is demonstrating that it is fully capable of adapting its legal toolkit to ensure it is fit for purpose and willing to use laws and regulations to maximum effect, to secure both short-term negotiating leverage and long-term national interests.
China’s growing ‘legal arsenal’
The same strategic logic is evident in China’s use of a broader legal arsenal.
Beijing has used the Anti-Monopoly Act to launch retaliatory investigations, such as an antitrust investigation into Nvidia in the wake of U.S. chip export controls. He used the Alien Anti-Alien Act to sanction defense companies such as Raytheon and Lockheed Martin over arms sales to Taiwan, even banning their executives from entering China.
China’s Untrustworthy Entities List (UEL), once considered a theoretical threat, is now a working tool. In 2025, PVH Corp., which owns Calvin Klein, and Illumina were listed over allegations of discriminatory practices, followed by a wave of US-based drone companies including Skydio and Brinc.
The message is clear: Now simply complying with U.S. law can trigger Beijing’s punishment. And that scope expanded even further this week. on thursday, China adds 14 more Western organizations It depends on UEL, much of it defense, intelligence and semiconductor ecosystem. These include TechInsights, a Canada-based leader in semiconductor intelligence, reverse engineering and market analysis. Beijing’s Ministry of Commerce has banned Chinese organizations and individuals from engaging in any trade, cooperation or data sharing with the listed firms.
This latest addition to the UEL list signals a new frontier in China’s legal strategy, targeting not only physical products and technologies, but also the information infrastructure and analytical capabilities that support supply chain transparency, compliance assessments, and competitive forecasts. It’s a stark reminder that data is now contested territory, and Beijing is willing to aggressively cut off the flow of insight as it once did the flow of minerals or equipment.
Other laws, such as the Data Security Act and the Personal Information Protection Act, have been used to restrict data flows and discipline firms operating across jurisdictions. The delisting of Didi Chuxing and LinkedIn’s departure from China show how quickly and unilaterally regulatory pressure can be applied to great effect.
But in recent years, China’s Export Control Law, applied to gallium, germanium and now rare earth magnets, has become its main economic lever. By imposing strict licensing requirements on the shipment of these chokepoint materials abroad, China is deliberately slowing the global flow of inputs needed for advanced manufacturing, clean energy, and defense supply chains. This law is no longer a back-office technicality of well-intentioned license application processes and approvals; It is an open and active tool of state administration.
This legal web is complex and sometimes unclear and overlapping; This gives Beijing the flexibility to apply pressure whenever and wherever it wants. China currently employs more than 20 such laws and regulatory statutes covering cybersecurity, foreign investment screening, maritime security, a corporate social credit system, and even food waste prevention and religious activities, creating a dense framework designed to coerce, retaliate, and reward to serve national objectives.
Chinese statecraft and the power of ‘paper tigers’
There’s also an even quieter, longer-term battle that China is winning: setting global standards.
Through the China Standards 2035 initiative and strategic placements in key international organizations such as the International Telecommunications Union (ITU), the International Organization for Standardization (ISO), and the International Electrotechnical Commission (IEC), China aims to define the technical norms that will govern the future of 5G telecommunications, artificial intelligence (AI), smart cities, and other new and advanced technologies. Standards determine what scales, who profits, and what governance models are codified into global systems.
Chinese companies such as Huawei and Hikvision are aggressive participants. US companies often have to deal with this problem alone. American regulators are generally absent. If this continues, U.S. firms and consumers will increasingly operate under rules set in Beijing, not Washington.
These may not be sexy topics. And they probably won’t be on the agenda of the Trump-Xi meeting on the APEC margin. But these are still critical issues. This isn’t necessarily about choosing geopolitical sides. It’s about creating a plan to navigate a contentious and fragmented global legal environment. The real challenge is how global companies will respond. Does a company know its full exposure? Do they have red lines, such as scenarios where it is clear what legal regime must be followed, and are U.S. companies prepared to make that decision and explain it to shareholders and regulators?
These are not platitudes. These form the basis of the strategic framework that companies must create, develop and rehearse before the next time they have to choose between complying with US law and maintaining a presence in the Chinese market. These are not easy questions to answer, nor are compromises comfortable to make. But ignoring them or longing for the good old days is not an option. They are not “paper tigers” as Chairman Mao might say. These are real, active tools used to pressure, coerce and protect Chinese firms from foreign competition, while also placing Beijing’s national interests at the center of the global regulatory ecosystem.
—With Dewardric McNealLongview Global Managing Director and Senior Policy Analyst and CNBC Contributor
