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US Research Security Review and China Operations: What Foreign Founders Need to Know

A recent US Department of Defense review of research security at US universities has led to the termination of partnerships with entities on the 1286 list, including many Chinese research institutions. China's Ministry of Commerce has responded, opposing the politicization of research cooperation. For foreign founders registering a company in China, this development underscores the importance of understanding compliance and risk management in cross-border research and business activities.

Practical Takeaways for Foreign Founders

On October 19 (US Eastern Time), the US Department of Defense released the results of a research security review concerning certain US universities. The review noted that these universities have fully terminated cooperation with entities on the so-called 1286 list, which includes many Chinese research institutions. China's Ministry of Commerce (MOFCOM) spokesperson responded to a reporter's question on October 23, 2026, expressing China's opposition to the US action.

For foreign founders looking to register and operate a company in China, this news may seem distant from daily business setup. However, it carries important implications for compliance, partnership choices, and risk management. Below, we break down what the MOFCOM statement says and how it might affect your China business strategy.

What Did the US Department of Defense Announce?

According to the MOFCOM spokesperson, the US Department of Defense published the results of a research security review of some US universities on October 19 (US Eastern Time). The review mentioned that these universities have completely ended their cooperative relationships with entities on the 1286 list. Many Chinese research institutions are included on this list.

The spokesperson noted that China has taken note of the situation. The Chinese side consistently opposes the US practice of overgeneralizing the concept of national security, politicizing, weaponizing, and instrumentalizing exchanges and cooperation in the research field, and making unreasonable "stigmatizing" accusations against Chinese research institutions.

China's Position on Research Cooperation

The MOFCOM spokesperson stated that the US actions are essentially coercing US research institutions to "take sides" and deliberately undermining normal China-US research cooperation. This, the spokesperson said, will only weaken the US's own scientific and technological progress and innovative development—literally "lifting a rock only to drop it on one's own feet."

The spokesperson emphasized that strengthening China-US research cooperation serves the common interests of both sides, and that restrictions and "decoupling" will only harm others and oneself.

China urges the US to respect facts, conform to the general laws of global scientific and technological exchange and cooperation and the trend of the times, and immediately stop the wrong practice of taking discriminatory and restrictive measures against Chinese research institutions. China will take necessary measures to safeguard the legitimate rights and interests of Chinese research institutions.

What This Means for Your China Company Registration

If you are a foreign founder planning to register a company in China, especially in technology, research, or education sectors, this development highlights several practical considerations:

• Partnership due diligence: Before entering into research collaborations or joint ventures with Chinese entities, verify whether your potential partners appear on any restricted lists, including the 1286 list. While the list is maintained by the US, it may affect your ability to work with certain institutions and could have reputational or contractual implications.
• Compliance with Chinese regulations: China's stance suggests that it will continue to support international research cooperation and protect the rights of Chinese institutions. However, foreign founders should ensure their activities comply with Chinese laws, including those related to foreign investment, data security, and technology export.
• Sector-specific risks: If your business involves sensitive technologies or research areas, be aware that geopolitical tensions may impact your operations. It is advisable to seek local legal advice to navigate potential restrictions.
• Entity structure and registration: The type of entity you choose (e.g., wholly foreign-owned enterprise, joint venture) may affect your ability to engage in certain research activities. Consulting with professionals can help you select the most suitable structure.

Steps for Registering a Company in China

For foreign founders new to China, the registration process generally involves several key steps. While this article does not provide legal advice, here is a general overview based on common practice:

1. Choose a company name: Select a name that complies with Chinese regulations and check its availability with the local Administration for Industry and Commerce (now part of the Market Supervision Administration).
2. Determine business scope: Clearly define your business activities, especially if they involve research or technology development, as some sectors may require special permits.
3. Prepare registered capital: Decide on the registered capital amount and contribution timeline, keeping in mind that some industries have minimum capital requirements.
4. Secure a registered address: Obtain a valid office address in China, which may be subject to verification.
5. Submit application documents: This typically includes the articles of association, investor identification, and legal representative information. Documents may need to be notarized and authenticated.
6. Obtain business license: After approval, you will receive a business license, which is the primary document for operating in China.
7. Post-registration filings: Complete tax registration, open a bank account, and register with relevant authorities as required.

Each step may have specific requirements depending on your location and industry. It is highly recommended to engage a local professional service provider to guide you through the process.

Tax and Compliance Considerations

Once your company is registered, you must comply with China's tax laws. This includes registering with the tax authorities, filing regular tax returns, and paying applicable taxes such as corporate income tax, value-added tax, and individual income tax for employees. Additionally, if your company engages in research and development, you may be eligible for certain tax incentives, but these often require careful documentation and compliance with government guidelines.

Furthermore, foreign founders should be aware of China's foreign exchange controls and ensure that capital contributions and profit repatriation are conducted through proper channels. Regular compliance audits can help mitigate risks.

Conclusion

The MOFCOM statement reflects ongoing tensions in China-US research cooperation, but it also signals China's commitment to protecting the legitimate rights of its research institutions and maintaining an open environment for international collaboration. For foreign founders, the key is to stay informed, conduct thorough due diligence, and adhere to compliance requirements when establishing and operating a company in China.

This summary is based on information published by the relevant Chinese government website and is general information, not legal or tax advice.

Call to action: Foreign founders can contact ChinaMNC on WhatsApp / WeChat at +86 153 1898 8535 for help registering and operating a company in China.