Conflicting regulations and national security priorities are changing how companies manage international operations and make decisions across borders.
In May, China’s Ministry of Justice ruled that parts of a European Commission investigation involving Nuctech, conducted under the EU’s Foreign Subsidies Regulation, were an improper extension of European law, and it barred organizations in China from helping carry it out. A second ruling followed in August. Both decisions were specific, but they exposed a wider challenge: a multinational company can face conflicting legal obligations when a foreign regulator seeks information held in China.
The episode raises a fundamental question: What does being global mean when the rules governing different markets no longer align?
EY-Parthenon’s July–August survey of 1,200 executives at companies with more than $500 million in revenue found that 91% were pursuing international growth, and the World Trade Organization raised its 2026 merchandise trade forecast to 3.9% in October, citing supply chain adaptation and artificial intelligence investment. Yet 52% of the executives said geopolitical constraints had reduced their commercial viability in some markets. Companies continue to pursue international expansion, but the conditions that once made global integration possible are becoming harder to sustain.
The integrated model and its assumptions
For decades, a global company operated as one integrated system, with design, sourcing, production, finance, data and compliance arranged to minimize cost under a common headquarters standard. The model was built around the assumption that countries would follow broadly compatible rules and that trade would operate within a relatively stable multilateral framework.
That assumption is weakening. WTO economists estimate that the share of world merchandise trade conducted on most-favored-nation terms, under which a country gives all members the same tariff treatment, fell to about 72% by the end of February from about 80% at the start of 2025.
The change matters because multinational operations depend on consistency. When governments apply different standards to trade, technology, investment and corporate conduct, decisions that once could be made centrally become more difficult to coordinate across borders.
Where foreign law meets the firm
Governments reach into companies through market access, investment screening, technology rules and law. The legal channel, the least familiar, comes first; investment screening follows.
China’s Decree 834, in force since March 31, allows investigations of foreign conduct that interrupts normal dealings with Chinese parties or imposes discriminatory measures where this threatens substantial harm to China’s supply chain security. Decree 835, in force since April 7, lets the Ministry of Justice designate a foreign measure as improper and then forbids anyone, including Chinese subsidiaries of foreign companies, from helping implement it. Chinese parties harmed by such help can sue.
The reach is still limited and as per the law firm Allen & Gledhill notes that an ordinary supplier change is not prohibited merely because a Chinese counterparty is affected. No foreign party has been named on the Malicious Entity List the second decree created, and no key-sector list has been published. The exposure is structural rather than demonstrated: home-country sanctions and due diligence rules can require actions that China’s rules may restrict.
Why security logic is displacing efficiency
The divergence reflects a change in what governments are trying to achieve. The UN Trade and Development agency said in July that capital once followed cost and efficiency but now follows strategic calculation and industrial policy. Strategic sectors such as semiconductors and critical minerals rose from 16% of global greenfield investment value in 2020 to 44% in 2025. Some 52 economies now screen foreign investment on security grounds, up from 21 a decade ago.
These measures are difficult to reconcile because they are rooted in national security assessments, not simply differences in commercial policy. A tariff can be negotiated or adjusted. A government’s assessment of whether a technology, supplier or investment poses a security risk is less likely to be resolved through conventional trade agreements.
How operations and organization are adapting
In the EY survey, 63% had altered operations or supply chains. Relocation is not simple: one consumer goods executive told EY that a planned shift to Southeast Asia still depended on Chinese components. UNCTAD finds no widespread move toward regionalized investment, which suggests adaptation is occurring by jurisdiction rather than by geography.
The harder change is organizational, as California Management Review researchers, drawing on 18 interviews and a six-month ethnography, found that regional rules push decisions outward while purchasing scale pulls them back to the center. The German manufacturer Wilo responded with a second headquarters in China, a third planned for the United States and, since February 2025, a regional headquarters in Dubai. One company does not establish an industry pattern, and the authors say the model suits only settings of high regulatory divergence.
Costs and the governance gap
The model is expensive, which makes selective adaptation more likely. EY-Parthenon estimated in July that replicating China-linked supply chains in the United States, eurozone and Britain would require $23.6 trillion through 2050, and concluded that partial decoupling is likelier. That is a projection, not an observed result. A nearer gap is governance: 62% of surveyed executives said their approach had improved risk identification, but only 47% said it had improved escalation and decision-making.
Selling in many countries no longer makes a company global in the old sense, because the integrated system has given way to operations that must satisfy rulebooks that do not agree. The evidence suggests that what now separates companies is the ability to decide, document and escalate across those conflicts before a regulator forces the choice.
Global reach still matters. But the ability to govern across borders is becoming an equally important measure of what it means to be global.
