China Anti-Espionage Laws Threaten Pharma Supply Chains and Multinational Manufacture in China

This doesn't seem like straight up retaliation, I mean it's not a gut-punch, it's not threatening to severely limit the supply of drugs to the US, just leave the US unable to inspect for health and safety compliance with the pipeline fully open. The US themselves would have to force the issue and literally shoot themselves in the foot and declare they want and will accept shortages (without backing down upon seeing the problem) to cause an issue here so I don't see this as really leverage against the US decoupling and sanctions regime.

If anything this seems like a gift to western capital that has stayed in China in the form of easing their regulatory compliance worries so they can run more cheaply and dangerously beyond the reach of western regulation.

Yes China could just straight up cut supply to the US but they could do that before this law was passed and that's a nuclear option. Thing is the US doesn't really care if lots of its workers die due to adulterated medication or supply crunches (as long as there's still enough for the "important people") so it's unlikely to get them to panic and come to China on hands and knees begging and offering concessions on tech restrictions so they can make sure the drugs are safe for their people. In an absolutist sense yes it's another thing they can bargain with the US over but it's a very weak hand compared to the hand the US holds and not equal to the US for example letting China import advanced AI chips or lithography technology. The types of concessions they could likely get for it aren't IMO likely to change the balance of things.

Now maybe this is an attempt to slow or stymie decoupling which is in fact happening. By preventing Chinese manufacturing knowledge and advancements from being observed and taken abroad to be used in spinning up a reshored factory in India or Vietnam or some soon to be impoverished region of the EU with newly cheap labor.