China is openly warning that it is prepared to retaliate if the European Union does not significantly soften two pieces of proposed legislation that Beijing sees as directly targeting Chinese firms and Chinese industrial influence.

Beijing will take countermeasures against the EU and companies unless substantial changes are made to the proposed “Buy European” Industrial Accelerator Act and to revised EU cybersecurity rules. China’s commerce ministry has argued that the measures are discriminatory, breach WTO principles, and would damage EU-China trade and cooperation.

China is building a far more formal legal architecture to resist the Western push to rewire global manufacturing away from Chinese suppliers. The new rules are not just another technical update to trade law.

They amount to an attempt to turn supply-chain defense into a core function of national security policy, giving Beijing broader authority to investigate and punish foreign governments, organizations, companies, and even individuals if their actions are judged to discriminate against China or endanger its industrial and supply-chain security.

China’s decision to place seven European defense-related entities on its export control list marks a meaningful escalation in the way Beijing is using trade and technology restrictions to retaliate against support for Taiwan. The companies targeted include Germany’s Hensoldt, Belgium’s FN Browning, and four Czech firms including Excalibur Army, and the restrictions took effect immediately.

Under the measure, exports of Chinese dual-use items to those entities are banned, related transactions must stop, and even third parties are barred from transferring Chinese-origin dual-use goods to them. It is a rare case of China applying Taiwan-related sanctions to European companies rather than only to U.S. defense contractors.