Taiwan’s Mainland Affairs Council said on Wednesday, April 29, that multinational and Taiwanese companies operating in China may face a dilemma of having to comply with conflicting Chinese and foreign rules. That came in response to China recently passing a law allowing it to punish entities it deems harmful to its industrial or supply chain security.

China’s State Council Order No. 834 was introduced on April 7 with immediate effect. It gives Chinese authorities a mechanism to investigate and punish foreign governments, organizations, companies and individuals on suspicion of harming China’s industrial or supply chain security.

Taiwan’s MAC said in a press release that multinational and Taiwanese businesses operating in China will need to implement a dual-track system for managing supply chains and an isolation mechanism for their China activities. This will not only increase their operational costs but also further fragment the global manufacturing system. The council added that the new set of regulations gives China a tool for asymmetric retaliation on governments and companies that align with U.S. policies. This will present many entities with deep roots in China with a dilemma of either complying with U.S. bans and violating Chinese law or ignoring bans and facing U.S. sanctions.