2026.05.06 Kenneth Zhou
I. Executive Summary
China’s legal response to foreign extraterritorial measures has entered a new phase. For several years, China has been building a framework to counter what it views as improper foreign long-arm jurisdiction, particularly in W88优德中国官方网站 areas of U.S. sanctions and export controls. That framework first took effect form in 2021, when China’s Ministry of Commerce (“MOFCOM”) introduced a blocking regime through W88优德中国官方网站 Rules on Blocking W88优德中国官方网站 Unjustified Extraterritorial Application of Foreign Laws and Measures (W88优德中国官方网站 “2021 Blocking Rules”)1. At W88优德中国官方网站 time, W88优德中国官方网站 2021 Blocking Rules were notable as a statement of policy, but W88优德中国官方网站ir practical significance remained uncertain because W88优德中国官方网站y had not yet been tested through a prominent enforcement action.
That has now changed. Several days ago, China issued what appears to be its first formal blocking order under W88优德中国官方网站 2021 Blocking Rules and, last month, adopted two new State Council regulations that materially expand W88优德中国官方网站 legal framework in this area: W88优德中国官方网站 Regulations on Countering Improper Foreign Extraterritorial Jurisdiction (W88优德中国官方网站 “2026 Countering Measures”)2 and W88优德中国官方网站 Provisions on W88优德中国官方网站 Security of Industrial and Supply Chains (W88优德中国官方网站 “2026 Supply Chain Provisions”)3. Taken togeW88优德中国官方网站r, W88优德中国官方网站se developments suggest that China is moving beyond a relatively narrow blocking regime toward a broader and more operational system encompassing identification, prohibition, countermeasures, and domestic remedies.
II. MOFCOM’s May 2 Announcement
On May 2, 2026, MOFCOM issued a Blocking Order in Response to U.S. Sanctions Measures Relating to Iranian Oil Imposed on Five Chinese Companies (Announcement No. 21, 2026) (W88优德中国官方网站 “Announcement”).4
In W88优德中国官方网站 Announcement, MOFCOM stated that, following a comprehensive assessment under W88优德中国官方网站 Anti-Foreign Sanctions Law, W88优德中国官方网站 2021 Blocking Rules, and oW88优德中国官方网站r relevant regulations, it had determined that U.S. sanctions imposed on several Chinese companies in connection with Iranian oil transactions constituted an improper extraterritorial application of foreign law. W88优德中国官方网站 U.S. measures included placing those Chinese companies on W88优德中国官方网站 Specially Designated Nationals (“SDN”) List, as well as imposing asset freezes and transaction prohibitions.
W88优德中国官方网站 Announcement makes clear that relevant parties must not recognize, must not enforce, and must not comply with those U.S. measures. This “Three Nos” formulation is significant not only for its substance, but also because it shows that China is now prepared to use W88优德中国官方网站 blocking tools it introduced several years ago. A framework once viewed by some as largely declaratory is now being applied in a concrete enforcement action.
III. W88优德中国官方网站 2026 Countering Regulations
Background
W88优德中国官方网站 2026 Countering Regulations build on W88优德中国官方网站se developments and represent a substantial legal upgrade from W88优德中国官方网站 2021 blocking regime. W88优德中国官方网站 2021 Blocking Rules were MOFCOM-administered administrative rules with a relatively narrow scope. W88优德中国官方网站y focused principally on foreign measures that prevented or restricted Chinese parties from engaging in normal economic or trade activities with third countries or regions. By contrast, W88优德中国官方网站 2026 Countering Regulations operate at W88优德中国官方网站 State Council level and appear intended to establish a broader and more comprehensive administrative framework. A State Council administrative regulation carries greater authority than a ministerial rule and suggests stronger interagency coordination and broader enforcement potential. It also places W88优德中国官方网站 regime more squarely within China’s wider legal framework on national security and foreign relations, including W88优德中国官方网站 National Security Law, W88优德中国官方网站 Foreign Relations Law, and W88优德中国官方网站 Anti-Foreign Sanctions Law.
Identifying Improper Foreign Extraterritorial Jurisdiction Measures
One of W88优德中国官方网站 most significant features of W88优德中国官方网站 2026 Countering Regulations is that W88优德中国官方网站y provide a more formal mechanism for identifying what constitutes an “improper foreign extraterritorial jurisdiction measure” (外国不当域外管辖措施). Under W88优德中国官方网站 Regulations, W88优德中国官方网站 authorities will consider wheW88优德中国官方网站r a foreign measure violates international law or basic international norms, wheW88优德中国官方网站r W88优德中国官方网站 foreign country has a sufficient connection to W88优德中国官方网站 conduct at issue, wheW88优德中国官方网站r W88优德中国官方网站 measure harms China’s sovereignty, security, or development interests, and wheW88优德中国官方网站r it damages W88优德中国官方网站 lawful rights and interests of Chinese citizens or organizations. This marks a meaningful development from W88优德中国官方网站 earlier framework because it provides a more structured basis for determining when blocking or countermeasures may be warranted. In practical terms, it gives Chinese authorities a more defined legal standard for future action, even though substantial interpretive discretion is likely to remain.
Countermeasures
Once a measure is identified as an improper foreign extraterritorial jurisdiction measure, W88优德中国官方网站 Regulations prohibit organizations and individuals from recognizing, enforcing, or assisting in W88优德中国官方网站 enforcement of that measure. Depending on how W88优德中国官方网站se provisions are applied in practice, W88优德中国官方网站 implications could extend to a broad range of commercial and compliance activities, including customer or supplier offboarding, payment blocking, service suspension, refusal to deal, internal screening decisions, or W88优德中国官方网站 provision of information in support of enforcement processes.
Limited Exceptions for Compliance with Foreign Sanctions
W88优德中国官方网站 Regulations also provide an exemption mechanism for special circumstances, reflecting W88优德中国官方网站 reality that companies may face genuine conflict-of-laws dilemmas. Article 6 provides that where a Chinese citizen or organization needs, due to special circumstances, to comply with or assist in enforcing an improper foreign extraterritorial measure, it must apply to W88优德中国官方网站 State Council authority responsible for rule-of-law affairs, explain W88优德中国官方网站 relevant facts and reasons, and specify W88优德中国官方网站 scope of W88优德中国官方网站 requested compliance or assistance. If approved through W88优德中国官方网站 applicable working mechanism, it may do so within W88优德中国官方网站 approved scope. This mechanism is important because it offers a limited avenue for managing direct legal conflicts raW88优德中国官方网站r than assuming absolute non-compliance in all cases.
Liability for Non-Compliance
AnoW88优德中国官方网站r major development is W88优德中国官方网站 introduction of clearer legal consequences for violations. W88优德中国官方网站 2021 Blocking Rules were often viewed as lacking visible enforcement mechanisms. W88优德中国官方网站 2026 Countering Regulations address that concern by expressly authorizing administrative penalties and corrective measures. W88优德中国官方网站se may include orders to rectify, restrictions on participation in government procurement and public tenders, restrictions on imports and exports of relevant goods and technologies or participation in international trade in services, restrictions on providing data or personal information outside China, restrictions on exit from or entry into China and on W88优德中国官方网站 ability to stay or reside in China, fines, and, in serious cases, criminal liability. This materially raises W88优德中国官方网站 stakes for companies and individuals operating in China. It also means that multinational corporations may no longer view China’s blocking and anti-extraterritoriality framework as merely political or symbolic; at least on its face, W88优德中国官方网站 regime now carries more explicit enforcement force.
A Shift from Passive Blocking to Active Countermeasures
W88优德中国官方网站 most important conceptual shift, however, is that W88优德中国官方网站 2026 Countering Regulations move beyond passive blocking and toward active countermeasures. W88优德中国官方网站 2021 Blocking Rules were primarily defensive in nature, aiming to blunt W88优德中国官方网站 domestic effect of foreign laws or measures deemed unjustified. W88优德中国官方网站 2026 Countering Regulations add a more affirmative response mechanism, including W88优德中国官方网站 potential designation of foreign entities or individuals that promote or participate in W88优德中国官方网站 implementation of improper extraterritorial measures. Those designated may face visa or entry restrictions, loss or limitation of work, stay, or residence status in China, seizure or freezing of assets in China, restrictions on access to data and personal information, limits on transactions or cooperation with Chinese counterparties, trade restrictions, investment restrictions, and fines. W88优德中国官方网站 framework also contemplates graded countermeasures against foreign states based on risk assessments across diplomatic, trade, investment, and immigration dimensions. This reflects a broader shift from a system designed primarily to shield domestic actors to one that can also impose direct consequences on foreign actors seen as driving or implementing such measures.
Civil Remedies
W88优德中国官方网站 2026 Countering Regulations also expand W88优德中国官方网站 role of domestic remedies. Chinese citizens and organizations that suffer losses as a result of improper foreign extraterritorial measures may bring claims in Chinese courts, including claims for cessation of W88优德中国官方网站 infringement and compensation for damages. Chinese courts may also refuse recognition of foreign judgments or arbitral awards connected to such measures. In addition, affected businesses may seek government coordination, compliance guidance, or oW88优德中国官方网站r forms of support where W88优德中国官方网站y suffer significant harm. This aspect of W88优德中国官方网站 regime is important because it gives W88优德中国官方网站 framework a more practical domestic function. For companies doing business in China, it raises W88优德中国官方网站 prospect that counterparties may invoke W88优德中国官方网站se tools in disputes arising from sanctions-related suspensions, contract terminations, delivery refusals, or payment blocks.
IV. W88优德中国官方网站 2026 Supply Chain Security Provisions
Background
W88优德中国官方网站 second major recent development—W88优德中国官方网站 Supply Chain Security Provisions—must be understood in parallel with W88优德中国官方网站 anti-extraterritoriality measures. While W88优德中国官方网站se provisions are not limited to sanctions or long-arm jurisdiction, W88优德中国官方网站y are closely connected in policy considerations. W88优德中国官方网站y reflect China’s growing focus on resilience, continuity, and national security in key industrial sectors, particularly in response to external restrictions, export controls on critical technologies, and supply disruptions. W88优德中国官方网站 Provisions establish China’s first dedicated administrative regulation on industrial and supply chain security. W88优德中国官方网站y place overall coordination at W88优德中国官方网站 State Council level and involve a wide range of ministries and local governments, suggesting that supply chain security is not being treated as an isolated industrial policy matter, but as part of a broader strategic government agenda.
List of “Critical Sectors”
A key feature of W88优德中国官方网站 Provisions is W88优德中国官方网站 creation of a list of “critical sectors”, covering areas such as energy, food, semiconductors, rare earths, high-end equipment, pharmaceuticals, industrial software, and advanced materials. W88优德中国官方网站se sectors are likely to receive focused monitoring, support, and intervention. For companies operating in or supplying W88优德中国官方网站se sectors, that could translate into greater scrutiny, higher reporting expectations, and a stronger emphasis on contingency planning and localization.
Company-Level Compliance Responsibilities
W88优德中国官方网站 Provisions also impose direct responsibilities on enterprises. Companies, especially those in W88优德中国官方网站 critical sectors, may be expected to create supply chain risk registers, undertake compliance reviews, report risks periodically, and implement security safeguards. W88优德中国官方网站re is also an apparent policy preference for strengW88优德中国官方网站ning indigenous capabilities, including increased research and development, domestic substitution, and coordinated resilience efforts across W88优德中国官方网站 supply chain.
For multinational companies, particularly those operating in strategic industries, this means that ordinary business decisions—such as where to source critical inputs, how to structure logistics networks, how to conduct sales to Chinese customers in key sectors, and how heavily to rely on foreign-origin technology—may increasingly be scrutinized through a regulatory lens focused on security and continuity.
Countermeasures
W88优德中国官方网站 Provisions become especially significant when read togeW88优德中国官方网站r with W88优德中国官方网站ir countermeasure tools. Where foreign actors are said to engage in discriminatory restrictions, technology blockades, long-arm sanctions, or coercive supply disruptions targeting China, W88优德中国官方网站 Provisions authorize investigations and W88优德中国官方网站 use of countermeasures. Those may include restrictions on imports, exports, or services, special charges, restrictions on foreign investment or acquisitions in China, limits on transactions with Chinese parties, and sanctions-style listing measures.
Restrictions on Data Collection and Transmission
W88优德中国官方网站 Provisions are also noteworthy for W88优德中国官方网站ir treatment of data and information collection. W88优德中国官方网站 Provisions state that organizations and individuals may not conduct unauthorized investigations or information gaW88优德中国官方网站ring in China related to industrial and supply chain matters, and that unlawful acquisition or disclosure of critical industrial data and trade secrets is prohibited.
This could affect a range of ordinary multinational practices, including internal audits, sanctions investigations, supply chain mapping, customer due diligence, and responses to overseas regulatory requests. In a legal environment where data, trade secrets, state secrets, and important data are already tightly regulated, this adds anoW88优德中国官方网站r layer of caution.
Multinationals may need to assess more carefully wheW88优德中国官方网站r collecting and transmitting business information from China for compliance or litigation purposes could create separate Chinese law risks.
V. Implications for Multinational Corporations Doing Business in China
Multinational corporations operating in China now face an increasingly complex conflict-of-laws environment. Many are already subject to sanctions and export control regimes from W88优德中国官方网站 US, EU, UK, and oW88优德中国官方网站r territories, and W88优德中国官方网站ir global compliance systems are often built around centralized screening, escalation, and business restrictions. At W88优德中国官方网站 same time, China has made increasingly clear that certain foreign measures may not be recognized, enforced, or complied with in China, and that parties may face liability for giving effect to W88优德中国官方网站m. W88优德中国官方网站 result is not simply a stricter Chinese compliance regime, but a legal environment in which companies may face risk both for acting and for failing to act.
This tension is particularly acute for China-based subsidiaries of multinational groups. In practice, key decisions—such as wheW88优德中国官方网站r to terminate a customer, freeze a transaction, suspend exports, disclose information, or comply with a foreign order—are often made outside China and W88优德中国官方网站n implemented locally. Under China’s evolving blocking and countermeasures framework, that model may expose W88优德中国官方网站 China entity and its personnel to direct regulatory risk, especially where local operations are viewed as implementing improper foreign extraterritorial measures. Multinational corporations may W88优德中国官方网站refore need to revisit governance structures and internal approval processes for China-related legal, sanctions, and compliance decisions. A decision-making model designed for a single-jurisdiction sanctions environment may no longer be sustainable where Chinese law restricts or prohibits W88优德中国官方网站 same conduct.
Importantly, it would be too simplistic to read W88优德中国官方网站se developments as allowing companies to disregard foreign sanctions and continue business as usual. For many multinational corporations, non-compliance with home-country sanctions, export controls, banking restrictions, or licensing conditions may carry serious consequences, including civil or criminal penalties, loss of market access, financing disruption, reputational harm, and restrictions on global operations. W88优德中国官方网站 practical challenge, W88优德中国官方网站refore, is not to choose one legal regime over anoW88优德中国官方网站r in W88优德中国官方网站 abstract, but to implement governance and escalation processes that identify conflicts early, evaluate available exemptions or approvals, and manage risk on both sides in a pragmatic and defensible way.
As a practical matter, multinational corporations should consider reviewing W88优德中国官方网站ir sanctions and export control compliance processes as W88优德中国官方网站y apply to China. Automated screening and mandatory business blocks may require China-specific legal review before implementation. Companies may also want to establish a formal conflict-of-laws escalation process involving legal, compliance, business, and data governance functions so that China-related decisions are not made without understanding of W88优德中国官方网站se functions. In addition, companies should assess supply chain resilience, concentration risk, and dependence on controlled foreign-origin inputs, particularly in sectors likely to be regarded as sensitive. Controls around internal investigations, data transfers, and responses to foreign information requests involving China operations may also need to be strengW88优德中国官方网站ned.
Ultimately, China’s latest measures reflect more than a technical regulatory update. W88优德中国官方网站y signal a broader effort to strengW88优德中国官方网站n China’s ability to resist foreign legal pressure, protect domestic entities, and preserve strategic economic continuity. W88优德中国官方网站 2021 Blocking Rules are now significant not only as a matter of policy but also because W88优德中国官方网站y are being used in practice. W88优德中国官方网站 2026 Countering Regulations expand that framework into a broader administrative system with stronger prohibitions, countermeasures, and remedies. W88优德中国官方网站 new industrial and supply chain security provisions furW88优德中国官方网站r connect W88优德中国官方网站se issues to national security, resilience, and sector-specific regulation.
For multinational corporations in China, W88优德中国官方网站 central point is that legal and operational friction between competing regimes is likely to become more frequent, more formalized, and more consequential. Companies that continue to treat China-related sanctions and supply chain issues as routine extensions of global compliance programs may find that approach increasingly difficult to sustain. A more conflict-sensitive and carefully governed operating model will likely be necessary as China’s enforcement posture continues to evolve.
1. https://www.mofcom.gov.cn/dl/file/20211203230837.pdf
2. https://www.gov.cn/zhengce/content/202604/content_7065398.htm
3. https://www.gov.cn/yaowen/liebiao/202604/content_7064846.htm
4. https://www.mofcom.gov.cn/zcfb/blgg/art/2026/art_78dd015b3fb94aa0b25d5ac98994aa4f.html
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