In 2026, the State Council of the People’s Republic of China issued the Regulations of the People’s Republic of China on Countering Improper Extraterritorial Jurisdiction by Foreign States (effective 7 April 2026). These regulations stipulate that the Chinese government and relevant departments can: i) identify undue extraterritorial jurisdiction measures by foreign entities; ii) assess the actions of relevant countries in implementing such measures; iii) promote the inclusion of foreign organisations and individuals implementing or participating in undue extraterritorial jurisdiction measures on a malicious entity list; and iv) decide to take one or more countermeasures and restrictive measures against them. The regulations also stipulate that if any organisation or individual implements or assists in the implementation of undue extraterritorial jurisdiction measures by foreign entities, infringing upon the legitimate rights and interests of Chinese citizens or organisations, Chinese citizens or organisations may file lawsuits in people’s courts in accordance with the law, demanding cessation of the infringement and compensation for losses. Furthermore, the Ministry of Commerce of China has repeatedly adjusted the controlled items. At the same time, counter-sanction enforcement activities have been very active. The Ministry of Foreign Affairs and the Ministry of Commerce have repeatedly taken countermeasures and punitive measures to restrict activities by foreign entities that harm China’s national interests and damage the legitimate rights and interests of Chinese enterprises and individuals.

China has been continuously improving its anti-sanctions legislation and strengthening the implementation of its anti-sanctions system at law enforcement and judicial levels. The Work Report of the Supreme People’s Court of the People’s Republic of China, released in March 2026, stated that it firmly upholds the country’s judicial sovereignty and implements the Anti-Foreign Sanctions Law to effectively counter illegal sanctions and “long-arm jurisdiction”. In one instance, a foreign company refused to sign a bill of lading on the grounds that a Chinese company was sanctioned. Upon application, a Chinese court issued an injunction ordering the foreign company to deliver the bill of lading and to compensate for losses.

Judging by the export control list released by the Ministry of Commerce, the announcement on the launch of the investigation of the unreliable entity list by the working mechanism of the unreliable entity list, and the decision on taking countermeasures released by the Ministry of Foreign Affairs, the manufacturing industry has been most affected, mainly in the fields of aviation, aerospace, the military industry, artificial intelligence, and drones.

The Ministry of Commerce and the Ministry of Foreign Affairs are the primary regulators for sanctions in China. The Ministry of Commerce is responsible for import and export controls and trade-related sanctions. The Ministry of Foreign Affairs is responsible for the country’s foreign policy, including sanctions against foreign entities and individuals. Depending on the nature of the sanctions, other state departments, such as the public security department, may also be involved in the implementation of sanctions.

At present, there are no explicit reporting obligations with regards to sanctions violations under sanctions law in China. However, citizens and organisations shall report activities endangering China’s national sovereignty, security, and development interests stipulated in the Provisions on the Unreliable Entity List since they have the obligation to report clues in a timely manner that endanger national security activities to the state security organisation according to the National Security Law of the People’s Republic of China.

According to the Provisions on the Unreliable Entity List, the working mechanism shall decide whether or not to investigate the acts of relevant foreign entities according to its functions and powers or the suggestions or reports from relevant parties.

The Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures issued by the Ministry of Commerce of China require Chinese entities to truthfully report to the competent commerce department of the State Council within 30 days when encountering situations where foreign laws and measures prohibit or restrict their normal economic and trade activities with third countries (regions) and their citizens, legal persons, or other organisations.

On 10 June 2021, the Anti-Foreign Sanctions Law of the People’s Republic of China officially came into effect, specifying the situations in which China has the right to take countermeasures, including:

• foreign countries violating international law and basic norms of international relations, using various excuses or, based on their own laws to contain and suppress China, adopting discriminatory restrictive measures against Chinese citizens and organisations, and interfering in China’s internal affairs; or
• foreign countries, organisations, or individuals committing, assisting, or supporting actions that endanger China’s sovereignty, security, and development interests.

On 1 July 2023, the Law on Foreign Relations of the People’s Republic of China began to be implemented officially. According to Article 33, the People’s Republic of China has the right to take, where appropriate, measures to counter or take restrictive measures against acts that endanger its sovereignty, national security and development interests in violation of international law or fundamental norms governing international relations.

On 1 January 2024, the new Civil Procedure Law of the People’s Republic of China came into effect. Article 300 stipulates that if a court determines that an effective judgment made by a foreign court violates the basic principles of the laws of the People’s Republic of China or national sovereignty, security, or social public interests, it shall rule not to recognise and enforce it.

On 8 November 2024, the Anti-Money Laundering Law of the People’s Republic of China was revised and passed, and was implemented on 1 January 2025.

On 21 March 2025, Provisions for the Implementation of the Anti-Foreign Sanction Law of the People’s Republic of China were passed and were implemented on 23 March 2025.

On 28 October 2025, the revised Cybersecurity Law of the People’s Republic of China was adopted, coming into effect on 1 January 2026. Article 77 of the law stipulates that any foreign institution, organisation or individual that engages in activities endangering the cybersecurity of the People’s Republic of China shall be held legally liable; if serious consequences result, the public security department and relevant departments of the State Council may also decide to freeze the assets or take other necessary sanctions against the institution, organisation or individual.

On 7 April 2026, the Regulations of the People’s Republic of China on Countering Improper Extraterritorial Jurisdiction by Foreign States were adopted and came into effect on 7 April 2026.

China has been active in refining its export control laws and implementing anti-sanctions measures to protect its national interests and the legitimate rights and interests of its companies. The introduction of the Unreliable Entity List is a strategic move to counteract measures that harm Chinese companies. China will continue to formulate necessary administrative regulations and departmental rules, establish corresponding work systems and mechanisms, strengthen departmental co-ordination, and determine and implement relevant countermeasures and restrictive measures against actions that endanger China’s sovereignty, security, and development interests.

Clients looking to do business in China should closely monitor these trends and work with legal and trade compliance experts to navigate the complex landscape of international sanctions and trade controls. It is also important to engage in proactive risk management and to be prepared for the potential impacts of sanctions on business operations.

According to the Provisions on the Unreliable Entity List, a correction deadline can be set for foreign entities included in the list of unreliable entities, during which no sanction measures will be taken. Foreign entities could be removed from the list of unreliable entities if they correct their behaviours and take measures to eliminate the consequences within the correction period. During the investigation conducted by the working mechanism, foreign entities may make statements and defend themselves.

If a foreign entity is restricted or prohibited from engaging in import and export activities related to China, and Chinese enterprises, other organisations or individuals need to conduct transactions with the foreign entity under special circumstances, they can apply to the Office of the Working Mechanism, and with its consent, they can conduct corresponding transactions with the foreign entities.

The working mechanism under the Provisions on the Unreliable Entity List can decide to suspend or terminate the investigation based on the actual situation; if there is a significant change in the facts on which the decision to suspend the investigation is based, the investigation may be resumed.

The working mechanism may decide to remove the relevant foreign entities from the list of unreliable entities based on the actual situation. If a foreign entity corrects its behaviour and takes measures to eliminate the consequences of its behaviour within the specified correction period in the announcement, the working mechanism shall make a decision to remove it from the list of unreliable entities. Foreign entities can apply to be removed from the list of unreliable entities, and the working mechanism will decide whether to remove them based on the actual situation.

The Provisions on the List of Unreliable Entities do not specify a time limit to obtain delisting. However, the decision to remove foreign entities from the list of unreliable entities should be announced. From the date of announcement, the sanctions measures taken in accordance with the Provisions on the List of Unreliable Entities shall cease to be implemented.

China’s export and import control regimes are currently not country-specific. The Ministry of Commerce regularly issues the Catalogue of Technologies Prohibited or Restricted from Export by China and the Catalogue of Technologies Prohibited or Restricted from Import into China.

The Ministry of Commerce, the Ministry of Industry and Information Technology, the General Administration of Customs, and the State Cryptography Administration published the Dual-Use Export Control List of the People’s Republic of China.

China implements sanctions mandated by the UN Security Council towards the Islamic State and Al-Qaeda, Yemen, Iraq, the Democratic Republic of Congo, South Sudan, Libya, Mali, Haitian gangs, Central Africa, and Al-Shabaab in Somalia.

China’s export and import control regimes are currently not country-specific. The Ministry of Commerce, the General Administration of Customs, and the Ministry of Ecology and Environment, in accordance with relevant laws and regulations, regularly issue the Catalogue of Prohibited Import Goods and the Catalogue of Prohibited Export Goods.

The Ministry of Commerce, the Ministry of Industry and Information Technology, the General Administration of Customs, and the State Cryptography Administration published the Dual-Use Export Control List of the People’s Republic of China.

China implements sanctions mandated by the UN Security Council towards the Islamic State and Al-Qaeda, Yemen, Iraq, the Democratic Republic of Congo, South Sudan, Libya, Mali, Haitian gangs, Central Africa, and Al-Shabaab in Somalia.

In judicial practice, PRC courts tend to evaluate whether sanctions constitute force majeure. That is to say, courts tend to evaluate whether the obstacles cannot be reasonably foreseen at the time of contract formation and the consequences of obstacles cannot be reasonably avoided or overcome by the affected parties. If they do not constitute force majeure, the judgment should be executed accordingly. If the judgment or ruling is not voluntarily complied with, the court may take measures to enforce its decision.

If the property of the person subject to enforcement within China has been pre-sealed, seized, or frozen by relevant Chinese departments in accordance with sanctions laws, and no property available for enforcement has been found through property investigation, the enforcement procedure may be terminated after the applicant for enforcement signs confirmation or the enforcement court forms a collegial panel to review and verify, and is approved by the President. After the termination of enforcement, if the applicant for enforcement discovers that the enforcee has property available for enforcement, they may apply for enforcement again.

Case 1

In a case regarding a sales contract dispute, the seller, Company A, signed a procurement contract with the buyer, Company B, and Company A promised in Annex 3 that the goods did not come from Iran. Afterwards, Company B refused to make payment since Company A was unable to provide proof, while Company A filed a lawsuit claiming that Annex 3 violated the Anti-Foreign Sanctions Law of the People’s Republic of China and the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures, violated mandatory provisions of laws and administrative regulations, and should be deemed invalid.

The court found that the statement was a unilateral commitment issued by Company A to Company B which should be considered as a true expression of Company A’s intention. Secondly, the main content of this document was that Company A promised that the goods did not come from Iran, and therefore did not fall within the scope of the Anti-Foreign Sanctions Law of the People’s Republic of China and the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures. Therefore, Company A’s inability to provide relevant supporting documents to prove to Company B the source of the goods involved in the case constituted a breach of contract.

Case 2

In a case regarding an application for the recognition and enforcement of foreign arbitral awards, Company C applied to the court for recognition and enforcement of an arbitration award made by the Singapore International Arbitration Centre Arbitration Tribunal. The respondent, Company D, requested that the court not recognise and enforce the arbitration award because the law firm to which the chief arbitrator belonged had been sanctioned by the Chinese government, resulting in the arbitration award being unfair.

Regarding the issue of whether the sanctions imposed by the Chinese government on the law firm to which the arbitrator belonged would affect the hearing of this case, the court believed that the sanctions were aimed at the law firm to which the chief arbitrator belonged and not at its arbitrator’s identity. This sanction was not within the scope of non-recognition as stipulated in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, was not related to the trial of this case, and there was no improper procedure. The issue of whether the recognition and enforcement of arbitration awards complied with the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures was also not related to this case, and the choice of arbitration was the result of the autonomy of the parties in this case.

The court ultimately held that the award made by the Singapore International Arbitration Centre in question did not fall under the circumstances of non-recognition and enforcement under Article 5 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and should be recognised and enforced.

Summary

In conclusion, PRC courts tend to respect the autonomy of the contracting parties regarding the agreement of sanctions or export control terms on the condition that sanctions or export control terms do not fall within the jurisdiction of the PRC sanctions laws, including but not limited to the Anti-Foreign Sanctions Law of the People’s Republic of China, the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures, and the Export Control Law of the People’s Republic of China.

According to the Provisions on the Unreliable Entity List, China has established a working mechanism with the participation of relevant departments of central state organs, responsible for organising and implementing the unreliable entity list system. The Office of the Working Mechanism is located in the competent commerce department of the State Council.

According to the Anti-Foreign Sanctions Law of the People’s Republic of China, the relevant departments of the State Council may decide to include individuals or organisations who directly or indirectly participate in the formulation, decision-making, and implementation of discriminatory restrictive measures as stipulated by this law in the list of countermeasures. The determination, suspension, modification or cancellation of the list of countermeasures, as well as countermeasures themselves, shall be announced by an order issued by the Ministry of Foreign Affairs or other relevant departments of the State Council.

There are similar provisions in China specifying the indirect designation of persons as a result of them being “owned or controlled” by a directly designated person. According to the Anti-Foreign Sanctions Law of the People’s Republic of China, the relevant departments of the State Council may decide to take countermeasures against the following individuals and organisations:

• spouses and immediate family members of individuals included in the list of countermeasures;
• senior management personnel or actual controllers of organisations included in the list of countermeasures;
• organisations where individuals listed on the countermeasures list serve as senior management personnel;
• organisations that are actually controlled, or were established and operated by, individuals and organisations included in the countermeasures list; and
• organisations that the individuals or organisations included in the countermeasures list actually control or participate in their establishment and operation.

The Company Law of the People’s Republic of China (Revised in 2023) stipulates that a controlling shareholder refers to a shareholder whose capital contribution accounts for more than 50% of the total capital of a limited liability company or whose shares account for more than 50% of the total share capital of a joint stock company. Additionally, a shareholder with less than 50% ownership may still be considered controlling if their voting rights, based on capital contribution or shareholding, are sufficient to exert a significant influence over the resolutions of the shareholders’ meeting. An actual controller refers to a person who can actually control the company’s behaviour through investment relations, agreements or other arrangements. These provisions help to analyse ownership and control.