China Continues to Develop its Anti-sanctions Toolkit and Put Them into Action

Please click "Read more" at the end to find the PDF version of this article.

Against the backdrop of growing geopolitical tensions and increasing "decoupling" and "de-risking" pressures, China has, in recent months, accelerated the development of its legal framework for countermeasures while intensifying related enforcement efforts.

In April 2026, China's State Council successively promulgated the Provisions on Industry and Supply Chain Security ("Decree No. 834")[1] and the Regulation on Countering Improper Extraterritorial Jurisdiction by Foreign States ("Decree No. 835")[2] . Building on these measures, on 24 June 2026, the Ministry of Commerce ("MOFCOM") issued the Measures for Industry and Supply Chain Security Investigations ("Investigation Measures")[3], further operationalizing the industry and supply chain security investigations ("Security Investigations") established by Decree No. 834.

Meanwhile, China has also intensified its anti-sanctions enforcement efforts – ministries are stepping up to exercise their powers, in some instances for the first time since the enactment of the regulations. On 2 May 2026, the MOFCOM issued China's first order under the Measures on Blocking Improper Extraterritorial Application of Foreign Laws and Measures ("Blocking Rules")[4], seeking to prohibit the recognition, enforcement and compliance with the U.S. sanctions imposed on certain Chinese entities ("Blocking Order") [5]. Subsequently, on 15 May 2026, the Ministry of Justice ("MOJ") issued the first announcement under Decree No. 835 ("Identification Announcement"), concluding that certain measures adopted by the European Union (EU) pursuant to the Foreign Subsidies Regulation ("FSR") constitute improper extraterritorial jurisdiction[6].

This article examines the newly issued Investigation Measures, together with China's first Blocking Order and the first Identification Announcement, with a view to offering practical observations to assist multinational companies in navigating China's evolving anti-sanctions compliance landscape.

The Investigation Measures clarify a number of important substantive and procedural issues concerning the launch of the Security Investigations under Decree No. 834.

• Which ministry is the competent investigating authority?

The Investigation Measures designate the MOFCOM as the authority responsible for conducting the Security Investigations, which is also responsible for publishing investigation findings and, together with other competent authorities, adopting corresponding countermeasures based on those findings. (See Articles 2, 16, 17 and 18)

• How to determine whether the conduct of the foreign state or foreign private entity being investigated harms, or threatens to harm, China's industry and supply chain security?

Under Decree No. 834, the Security Investigations may be initiated in response to two categories of conduct: (i) discriminatory and/or restrictive measures imposed by foreign states against China; and (ii) discriminatory actions taken by foreign private entities that, in violation of normal market principles, suspend or terminate commercial dealings with Chinese entities. In either case, the conduct must have caused, or has the potential of causing, harm to China's industry and supply chain security.

According to the Investigation Measures, such harm should be assessed through the lenses of the security, fluidity and competitiveness of the industry and supply chain concerned (see Article 4):

First, the impact on the "security" of industry and supply chain elements both within and outside China, including critical materials, technologies, capital, assets, data, information, personnel, enterprises and projects. As an example, relocating business operations, commercial projects or entire product supply chains out of China could be regarded as undermining the security of such elements.

Second, the impact on the "smooth flow" of industry and supply chain elements both within and outside China, including the flow of goods, commerce, personnel, capital, data and information. For example, suspending the supply of key raw materials, components or products to Chinese companies at critical stages of the supply chain for non-commercial reasons may be regarded as impairing the smooth flow of relevant elements of the industry and supply chain.

Third, the impact on the international competitiveness and long-term development potential of China's industry and supply chains. This factor may be considered together with the preceding factors to assess the overall impact of the measure or action on China's industry and supply chain security.

With the fourth category of "other factors that impact the security of industry chain and supply chain", the above list of factors for assessment is designed as open-ended. This may allow MOFCOM to assess and determine, on a case-specific basis, whether particular measures have caused or are likely to cause harm to China's industry and supply chain security.

• How may an investigation be initiated?

Pursuant to Decree No. 834, the MOFCOM may either initiate an investigation ex officio, or on the basis of the "report" submitted by an enterprise, chamber of commerce or industry association.

Building on this framework, the Investigation Measures further set out the reporting procedures applicable to domestic legal persons and other organizations. Such entities may submit evidence, reports and other supporting materials concerning the relevant measures directly to the MOFCOM or to the competent provincial commerce authorities for onward transmission. The MOFCOM will then determine whether to formally initiate an investigation. (See Articles 5, 6 and 7)

• How will MOFCOM conduct an investigation?

The Investigation Measures authorize the MOFCOM to employ a broad range of investigative tools, including interviewing relevant parties, reviewing or copying relevant materials, publicly soliciting information, issuing questionnaires, conducting sample surveys, commissioning technical assessments, holding hearings and carrying out on-site inspections. The scope of MOFCOM's investigation is not limited to information submitted by the parties. Rather, the MOFCOM may also collect relevant information on its own initiative. (See Article 8)

For on-site inspections, the Investigation Measures permit the MOFCOM, where necessary, to conduct investigations outside China, unless the relevant foreign state or region objects. (See Article 10) This provision reflects due regard for the sovereignty of other jurisdictions.

While most of these investigative tools are already being used in other types of foreign trade investigations conducted by the MOFCOM, the Investigation Measures further introduce an Expert Advisory Panel mechanism, under which the MOFCOM may establish an expert panel to provide technical and legal advice on issues arising during an investigation. (See Article 9) This mechanism further ensures the technical rigor and legal compliance of the Security Investigations.

• What rights and obligations do investigated parties have during a Security Investigation?

The Investigation Measures provide procedural safeguards for investigated parties and other interested persons by affording them the opportunity to make statements, present arguments and submit written materials. (See Article 11) On the other hand, the investigated parties also bear the obligation to cooperate with the investigation. Where a party seriously obstructs the investigation, the MOFCOM may make its findings on the facts that are already available. (See Article 12)

• When may the MOFCOM suspend or terminate a Security Investigation?

The MOFCOM may suspend or terminate an investigation whenever it considers appropriate. In addition, the MOFCOM may terminate an investigation by public announcement where the foreign state or private entity concerned has withdrawn or amended the relevant measures, eliminated the actual or potential harm to China's industry and supply chain security, or reached a mutually acceptable resolution with the Chinese government. (See Articles 14 and 15)

• What countermeasures may be imposed following a Security Investigation?

The MOFCOM may, together with other competent authorities, impose countermeasures against the relevant foreign state or private entity based on the investigation results. The Investigation Measures reaffirm the categories of countermeasures set out in Decree No. 834. (See Articles 17 and 18)

For foreign states, available countermeasures include prohibiting or restricting trade, imposing special charges, and placing the organizations and individuals involved in formulating, determining or implementing the relevant measures on China's Countermeasures List.

For foreign private entities, the MOFCOM may prohibit or restrict their engagement in China-related economic and trade activities, including imports and exports, investment in China, transactions or cooperation with Chinese organizations and individuals. Additional measures include entry restrictions and the cancellation or limitation of their right to remain in China. Consistent with Decree No. 834, these measures may also extend to entities that are controlled by, or established or operated with the participation of, the relevant foreign entity.

The Investigation Measures further reaffirm the obligation of Chinese entities to comply with the countermeasures. Failure to do so may result in restrictions relating to government procurement, public tendering, international trade, cross-border data transfers, and cross-border entry and exit. (See Article 19)

On 2 May 2026, the MOFCOM issued China's first Blocking Order under the Blocking Rules – ever since the adoption of the Blocking Rules in 2021. Issued in response to the U.S. sanctions targeting five Chinese companies in connection with Iran-related oil activities, the Blocking Order requires that such U.S. sanctions – including the placing of the companies on the SDN List, asset freezes, and transaction prohibitions – shall not be recognized, enforced or complied with.

Article 2 of the Blocking Rules provides that the regime applies where the extraterritorial application of foreign legislation or other measures violates international law or the basic principles of international relations by unjustifiably prohibiting or restricting Chinese entities from engaging in normal economic, trade and other related activities with third countries or regions or with entities from those countries or regions. Thus, this Blocking Order also marks the first time that China has formally determined that the imposition of such unilateral sanctions by the U.S. constitutes an unjustified extraterritorial application of foreign measures.

The core requirement of the Blocking Order is that the relevant U.S. sanctions must not be recognized, enforced or complied with. From a practical perspective, the prohibition on recognition means that Chinese courts and arbitral tribunals should not give effect to the relevant U.S. sanctions decisions. For example, a party may not be permitted to rely on sanctions clauses or sanctions-based defenses as grounds for excusing contractual performance with respect to entities covered by the Blocking Order. The prohibitions on enforcement and compliance further require that entities must not refuse transactions with entities covered by the Blocking Order, suspend the provision of goods or services, freeze a listed party's assets, or take similar actions solely for the purpose of complying with the relevant U.S. sanctions.

Notably, pursuant to Articles 9 and 13 of the Blocking Rules, violation of the Blocking Order may expose the party not only to administrative penalties (including warnings, orders for rectification and fines), but also to civil claims brought by Chinese parties whose legitimate interests are impaired.

While the Blocking Rules target the improper extraterritorial restrictions imposed on trade activities, Decree No. 835 covers a broader range of improper extraterritorial jurisdictional measures which violate international law, lack appropriate nexus with the foreign state, and impair China's interests.  Such measures include, in particular, improper cross-border law enforcement and evidence collection.

In this respect, on 15 May 2026, the MOJ declared that the EU's investigation into the Chinese company NUCTECH under the FSR constitutes improper extraterritorial jurisdiction under Decree No. 835. This very first Identification Announcement under Decree No. 835 states that the EU's cross-border demands for extensive Chinese domestic information constitute unlawful requirements that violate international law and fundamental principles of international relations.

Notably, the Identification Announcement prohibits any organization or individual from executing or assisting in executing such measures. Further pursuant to Articles 14 and 17 of Decree No. 835, failure to comply with such prohibition could subject the parties to both administrative and civil liabilities.

According to the press release[7], the MOJ characterizes the EU's FSR as a unilateral tool used to investigate Chinese enterprises with obvious targeting and discrimination, representing protectionism disguised as fair competition. The MOFCOM had already determined in January 2025 that the EU practices constitute trade and investment barriers, yet the EU has intensified rather than corrected its actions.

The MOJ states that China firmly rejects foreign abuse of "long-arm jurisdiction" against Chinese citizens and enterprises. This Identification Announcement represents concrete implementation of China's anti-extraterritorial jurisdiction legislation. China urges the EU to immediately rectify its wrongful practices. Should the EU persist, China will take decisive legal countermeasures to safeguard national sovereignty, security, and development interests.

As the first case declaring that a foreign investigation constitutes improper extraterritorial jurisdiction under Decree No. 835, the Identification Announcement marks the shift of China's legal countermeasures from legislation to enforcement practice.

The latest Investigation Measures and the enforcement practices demonstrate China's resolve to not only build up a robust anti-sanctions legal regime, but also to put its toolkit in action. It is expected that enterprises doing business in or with China will be faced with increasingly complex compliance requirements in the sanctions and anti-sanctions sectors. As such, enterprises are advised to adopt the following steps in order to better navigate the legal complications amid geopolitical tensions.

• Enhance screening of China's enforcement practices and countermeasures

In view of the active anti-sanctions legislation and enforcement, it is crucial to monitor any investigations, orders, and announcements issued by Chinese regulators under the anti-sanctions regulations, and to add to the company's compliance radar any countermeasures adopted.

• Establish a legal conflict assessment mechanism

Based on developments in sanctions and anti-sanctions enforcement actions across major jurisdictions, companies should also establish an internal mechanism for assessing conflicts of law, and develop appropriate compliance response plans by factoring in the specific role of the company and potential consequences under each of the plans.

• Strengthen internal control over cross-border commercial decisions

Cross-border adjustments to the company's business operations should be evaluated from the perspective of industry and supply chain security and should be properly addressed if such adjustments are due to governmental pressure from other jurisdictions. It would be helpful for the company to maintain records documenting the business decision-making process in case any investigations are initiated to look into the matter.

Thanks to Xiaokun Yuan and Jiajun Ren for their contributions to this article.

转载声明：好文共赏，如需转载，请直接在公众号后台或下方留言区留言获取授权。如需引用文中观点、数据或评述，亦请提前联系我们取得授权。请勿随意摘编、节选或改编本文内容。