China Builds Legal Machinery To Flip Civilian Economy Into War Mode

China is tightening its national security controls on multiple fronts, expanding authorities over civilian industry and wartime mobilization while imposing new exit restrictions on Chinese citizens tied to sensitive technology and export controls.

A revised national defense mobilization law set to take effect Oct. 1 lays out how civilian economic capacity can be redirected toward China’s defense needs, according to China’s Ministry of Commerce. The changes come as Beijing is also imposing tighter controls on the movement of people and sensitive technological knowledge amid its intensifying competition with Washington, The Wall Street Journal reported.

“For the first time, the law makes clear that its goal is to ‘ensure a rapid transition between peace and war,’” Allen Zhang, a research assistant in the Asian Studies Center at The Heritage Foundation, told the Daily Caller News Foundation. “While this doesn’t automatically signal that China is gearing up for conflict, it does beg the questions of why such a change was made and why it was made now. This revision is the first in 16 years and, in my view, reflects an effort to adapt to the new era of warfare increasingly shaped by artificial intelligence (AI).”

This move shows that China is strengthening its resolve to prepare for war, just as Chinese President Xi Jinping is expected to visit President Donald Trump in Washington next week.

The revised law defines national defense mobilization as measures designed to enable a rapid transition between peacetime and wartime and transform China’s economic and social capacity into defense strength, according to China’s Ministry of Commerce. China’s National People’s Congress Standing Committee approved the revision Aug. 28, and it takes effect Oct. 1, according to the Chinese Ministry of National Defense.

“Following the constant bipartisan threats and saber-rattling from the United States, China has predictably done what any rational actor would do,” Steve Hanke, a professor of applied economics at Johns Hopkins University, told the DCNF. “Indeed, China is preparing to defend itself against a threatening superpower. China’s moves are well thought out and significant. The U.S. should learn that if you poke a stick in a hornet’s nest, you are liable to be stung. That said, one should never underestimate the stupidity of U.S. foreign policy initiatives.”

The White House, State Department and Chinese Embassy in Washington did not respond to requests for comment.

“This is a new expansion of China’s muscle flexing,” Heritage Foundation visiting fellow and former Pentagon official Steven Bucci told the DCNF. “It would obviously help them flip their economy more quickly. It is also exactly the danger of setting up production facilities in China. They play by different rules.”

Washington has also accused Beijing for years of using coercive technology transfers and intellectual property theft to obtain foreign technology. Forced technology transfer, including state-sponsored theft of trade secrets, remains an ongoing U.S. concern regarding China, according to the Office of the U.S. Trade Representative.

Companies assigned military research, production, conversion or maintenance roles must stockpile equipment, materials, technology, data and software and establish technical teams capable of performing those missions, according to the Chinese Ministry of Commerce. Those organizations must also formulate plans and conduct exercises before a mobilization takes place.

Although the White House has previously told the DCNF that Chinese President Xi Jinping has assured the administration that China will not attack Taiwan for the duration of the Trump presidency, this new move by Beijing certainly looks like a major step toward setting up a wartime economy.

Once Beijing orders national defense mobilization, companies assigned such roles must shift or expand production in accordance with military requirements, while firms supplying energy, equipment, technology, data or software are required to prioritize military needs, according to the Chinese Ministry of Commerce. The law provides compensation for direct economic losses incurred while carrying out those assignments.

The law goes further if existing reserves cannot meet military requirements. Local governments may requisition civilian resources after national mobilization is declared, while “any organization and individual” has a legal obligation to comply with lawful requisition orders, according to the Chinese Ministry of Commerce.

“I think the more likely purpose is to send an unmistakable message to Taiwan: that China intends to pursue reunification by any means possible and is prepared to bring the full toolkit of the Chinese state to bear, from military capabilities to, now, commercial assets,” Zhang told the DCNF. “Beijing’s preferred outcome remains compelling Taiwan into reunifying the mainland without fighting, and this amendment is part of an effort to convince Taipei that resistance is futile.”

Tensions over Taiwan have meanwhile continued to sharpen as Beijing conducts regular military operations around the island and Taiwan accelerates its own preparations for a potential conflict. Taiwan’s 2026 defense spending is set to reach NT$949.5 billion (New Taiwan Dollars), or roughly $29.8 billion in U.S. dollars, while Taipei has also proposed billions more in additional spending on missiles, drones and other asymmetric capabilities, according to Taiwan’s Ministry of National Defense.

That exposure matters because American companies remain deeply tied to Chinese manufacturing and supply chains even after years of diversification efforts. The U.S. imported roughly $309 billion in goods from China in 2025, while total U.S.-China goods trade reached about $415 billion, according to the Office of the U.S. Trade Representative.

Those ties span far beyond finished consumer goods, with U.S. manufacturers relying on complex global value chains that incorporate imported components and intermediate inputs.

Apple, Tesla, Nike and Hasbro are among major American companies that continue to rely on manufacturing in China. Apple’s own supply-chain materials show Apple Watch assembly taking place in mainland China, while Tesla lists both its Gigafactory Shanghai and Megafactory Shanghai among its principal manufacturing facilities, according to Apple and Tesla’s SEC filings.

Nike reported that Chinese factories produced roughly 12% of its apparel in fiscal 2026, according to its latest SEC filing. Hasbro likewise reported that third-party manufacturers in China remain part of its global production network and publicly identifies multiple Chinese factories producing its products, according to Hasbro and its 2025 annual report

German member of the European Parliament Engin Eroglu warned Monday that the framework could reach companies based in China, including foreign firms and their subsidiaries, and could place production facilities, equipment and intellectual property at Beijing’s disposal during a conflict, according to a post on X from Engin Eroglu, a German member of the European Parliament who chairs the European Parliament’s delegation for relations with China. The official Chinese legal text reviewed by the DCNF broadly applies its requisition provisions to organizations and individuals, but does not separately name foreign companies in those provisions.

“They [foreign companies in China] will lose everything, or at least be held hostage if war broke out,” Bucci told the DCNF.

The mobilization system also reaches deeply into civilian infrastructure. Transportation, telecommunications, cybersecurity, health care, food supply, construction, energy, civilian nuclear facilities, news media and other designated sectors must prepare specialized support teams and conduct training during peacetime, according to the Chinese Ministry of Commerce.

Chinese men between 18 and 60 and women between 18 and 55 can also be required to perform national defense duties after mobilization, subject to exemptions enumerated in the law, according to the Chinese Ministry of Commerce. Specialized personnel can be assigned certain defense duties regardless of those age limits.

The framework fits into Beijing’s longstanding effort to erode barriers between civilian technological development and military modernization, commonly referred to as military-civil fusion. Xi elevated military-civil fusion to a national strategy in 2015, and the policy has since been incorporated into a broader whole-of-nation approach to strengthening China’s military capabilities, according to the Pentagon.

Beijing is simultaneously tightening control over technological talent leaving China. New rules that took effect Sept. 15 allow authorities to prevent Chinese citizens from departing the country over violations of export controls or technology-transfer rules that could threaten industrial or technological security, the WSJ reported, citing the new regulations and Chinese legal experts.

“I could see this catalyzing a push in Congress to bar certain American defense or tech companies from entering the Chinese market – or, at a minimum, to impose stricter regulations on those that do,” Zhang told the DCNF. “It makes no sense for American companies to help build capabilities that could one day be turned on American forces. There is already a real worry that U.S.-developed AI is quietly powering China’s armed forces and we can reasonably start to expect that concern to be extended to other tech sectors.”