The European Union’s recent implementation of a Carbon Border Adjustment Mechanism (CBAM) has intensified scrutiny on China, the world’s largest emitter of greenhouse gases. The policy, designed to level the playing field for EU producers by levying tariffs on imported goods with high embedded CO2 emissions, is now exerting significant pressure on Chinese steel manufacturers and other heavy‑industry exporters. This development underscores a growing clash between global climate governance frameworks and national industrial strategies, particularly in China where state‑controlled entities continue to drive environmental degradation. Key facts reveal that the CBAM imposes “absurd” rules on Chinese steel firms, forcing them to account for carbon intensity and pay additional duties on exports to the EU. The policy aligns with the European Green Deal’s ambition to reduce emissions by 55% by 2030 and reflects the TCFD recommendation to disclose transition risks. China’s response—highlighted in reports from CSIS—shows a defensive stance, citing concerns over trade fairness and potential retaliation. The involvement of Chinese Communist Party‑controlled entities indicates that environmental harm is not only industrial but also politically orchestrated, raising questions about compliance with GRI standards on governance and the UN SDG 13 target for climate action. For investors and regulators, this escalation signals heightened exposure to transition risk in China’s steel sector and potential supply chain disruptions. Communities near Chinese steel plants may face increased pollution and health risks if firms delay decarbonisation to avoid tariffs. The policy could accelerate investment in low‑carbon technologies but also risks widening geopolitical tensions that might undermine global cooperation on climate goals. Overall, the EU CBAM’s impact on China highlights a critical juncture where environmental ambition clashes with economic interests, demanding robust ESG disclosures and proactive risk management from multinational stakeholders.