China's Ministry of Justice has barred compliance with the EU's anti-subsidy probe into Nuctech, escalating a dispute over the bloc's first in-depth investigation under its Foreign Subsidies Regulation. The announcement, effective immediately, declares the commission's cross-border investigative measures improper extraterritorial jurisdiction.

The case began in April 2024 when European Commission inspectors raided Nuctech offices in Poland and the Netherlands, demanding access to data stored on servers in China. Nuctech refused, citing China's data security law, and challenged the inspections in both the General Court and Court of Justice of the European Union — both courts upheld the commission's authority. In December 2025, Brussels advanced the probe to a full in-depth investigation, alleging Chinese state subsidies distorted competition in the EU border-security market.

Beijing's response signals a hardening stance. The Ministry of Commerce determined in January 2025 that the EU's practices constitute trade and investment barriers, while the Justice Ministry labeled the FSR a discriminatory unilateral tool. China's counter-regulation on extraterritorial application of foreign laws now provides the legal basis for retaliatory measures against European entities operating in China.

The standoff creates immediate risk for Nuctech's European contracts and broader border-security equipment supply chains. With the FSR's first deep probe targeting a Chinese state-backed champion, the precedent will shape how Brussels pursues foreign subsidies across sectors. Investors should watch for retaliatory Chinese measures against EU firms and whether the commission's evidence withstands judicial scrutiny — a test case for economic security policy.