China Unveils New Rules to Crack Down on “Malicious Entities” Complying with Foreign Extraterritorial Sanctions

On April 13, 2026, China’s Premier Li Qiang signed a State Council decree promulgating the Regulations of the People’s Republic of China on Countering Improper Extraterritorial Application of Foreign Laws, which took effect immediately.

Against the backdrop of escalating U.S.–China trade tensions, the global impact of “reciprocal tariffs,” and the Israel–Iran–U.S. conflict, the Regulations represent a major institutional upgrade of China’s counter-sanctions legal toolkit.

Comprising 20 articles, they establish an integrated framework of identification, blocking, and countermeasures, and for the first time formally codify the “Unreliable Entity List” and “prohibition orders” at the level of administrative regulation, signaling a shift in China’s approach to foreign-related rule-of-law from passive defense to a more offensive-defensive posture.

The operational logic of the Regulations can be understood as a closed loop moving from identification, to blocking, to countermeasures, and then to implementation and remedies.

At the core is a centrally coordinated “working mechanism” under the State Council, through which different agencies share information, make decisions, and coordinate enforcement, effectively consolidating previously fragmented capabilities into a unified system.

The first step is identification. Led by the State Council’s rule-of-law authorities, foreign measures are assessed based on whether they violate international law, lack a reasonable jurisdictional nexus, or harm China’s national interests or the lawful rights of its citizens and organizations. Once a measure is determined to constitute “improper extraterritorial application,” it may be publicly designated.

Following identification, the key step is blocking. The Regulations stipulate that, in principle, no organization or individual may comply with such foreign measures. This directly reshapes corporate compliance behavior. At the same time, an exemption mechanism allows entities to apply for approval in exceptional circumstances, thereby centralizing ultimate discretion at the state level.

On this basis, China may adopt countermeasures. These include both macro-level tools—such as diplomacy, trade, and investment—and more targeted instruments linked to the Anti-Foreign Sanctions Law of the People’s Republic of China. In particular, the “Unreliable Entity List” enables the imposition of measures such as visa restrictions, asset freezes, and limits on transactions and investment.

Implementation is carried out through the working mechanism, with decisions transmitted to relevant enforcement agencies. Regulators are empowered to conduct investigations, inspections, and compliance interviews, and may issue prohibition orders requiring specific entities not to comply with foreign measures, ensuring enforceability at the operational level.

The Regulations also provide for remedies. Affected parties may apply for suspension or removal of countermeasures, while Chinese citizens and companies may bring lawsuits before domestic courts seeking cessation of harm and compensation, thereby incorporating these disputes into China’s judicial system.

Enforcement is backed by penalties. Entities that fail to comply with countermeasures or violate prohibition orders may face restrictions on market access, trade, data flows, and cross-border mobility, as well as fines and potential legal liability.

Compared with earlier rules such as the 2021 blocking measures issued by the Ministry of Commerce, this Regulation introduces the more robust “Unreliable Entity List.” Entities placed on the list may face comprehensive restrictions, including entry bans, loss of work or residence status in China, asset freezes, prohibitions on transactions with Chinese entities, limits on trade and investment, restrictions on products entering China, and monetary penalties.

Notably, the Regulation also restricts the provision and cross-border transfer of data and personal information involving listed entities. This effectively cuts off access to China-based data resources, a measure likely to have a deeper and more structural impact on business operations than traditional tools such as visa bans or asset freezes.

The Regulation marks a significant upgrade from the 2021 blocking rules, which were ministerial-level measures. As a State Council administrative regulation, it carries higher legal authority. It also introduces a key doctrinal shift by explicitly asserting China’s right to exercise extraterritorial jurisdiction over conduct with a sufficient nexus to China, moving beyond defensive blocking toward an affirmative jurisdictional claim.

Since 2020, China has gradually built a layered legal framework to respond to foreign extraterritorial measures, including the 2020 rules on the Unreliable Entity List, the 2021 blocking rules, the 2021 Anti-Foreign Sanctions Law, and the 2023 Foreign Relations Law. This Regulation fills an important gap at the administrative level and completes a more coherent system.

From a comparative perspective, similar mechanisms exist elsewhere. The European Union, for instance, adopted its Blocking Statute (Regulation No. 2271/96) as early as 1996 to counter U.S. sanctions. However, China’s approach goes further by introducing proactive tools such as the Unreliable Entity List, making it more assertive than the EU’s largely defensive model.

If strictly enforced, the Regulation may place companies operating in China—including multinational corporations and their Chinese subsidiaries—in situations of conflicting legal obligations. Where such conflicts cannot be reconciled, firms may be forced to assess which jurisdiction poses greater regulatory risk, significantly affecting compliance strategies.

In practice, companies may face uncertainty in applying the Regulation. While it outlines general criteria for determining “improper” extraterritorial measures, how these standards will be interpreted remains to be clarified through practice. This makes it difficult for firms to predict with certainty whether a foreign law or order will be deemed improper.

The exemption mechanism is designed to alleviate such dilemmas, but its effectiveness will depend on the clarity, transparency, and predictability of approval procedures. At present, businesses are closely watching for further implementing rules or guidance.

This Regulation forms part of China’s broader effort since 2020 to strengthen its foreign-related legal system. Chinese leadership, including President Xi Jinping, has repeatedly emphasized the need to better integrate domestic and foreign-related rule of law, and to use legal tools to respond to geopolitical competition, safeguard national sovereignty, security, and development interests, and shape global governance.

We must advance the rule of law in both domestic and foreign-related matters in a coordinated manner. We should accelerate the strategic layout of foreign-related legal work, promote coordination between domestic governance and international governance, and better safeguard national sovereignty, security, and development interests. We must strengthen law-based thinking and employ legal means to effectively respond to challenges and prevent risks, making comprehensive use of legislation, law enforcement, and judicial measures to carry out our efforts, and resolutely uphold national sovereignty, dignity, and core interests. We should also promote the reform of global governance and advance the building of a community with a shared future for mankind.

——Remarks by Xi Jinping at the First Meeting of the Central Commission for Comprehensively Advancing the Rule of Law in 2020.

Announcement No. 5 (2021) of the Standing Committee of the National People’s Congress has set out a roadmap for the relevant legislative work:

In accordance with the requirements set by the Fourth Session of the 13th National People’s Congress to improve foreign-related legislation, efforts should be coordinated and accelerated to advance such legislation. Focusing on countering sanctions, countering interference, and countering long-arm jurisdiction, China will enrich its legal “toolbox” to address challenges and mitigate risks, and make better use of legal instruments to safeguard national sovereignty, security, and development interests, while protecting the lawful rights and interests of Chinese citizens and organizations.

On July 11, 2024, Yin Baohu, Deputy Secretary-General of the China Law Society and President of Democracy and the Legal System, wrote in the Legal Daily that China should:

Follow the principle of prioritizing urgent needs, further improve laws and regulations on countering sanctions, countering interference, and countering ‘long-arm jurisdiction’; elevate relevant rules and policies into a formal blocking statute at an appropriate time; and promptly issue implementing rules for the Anti-Foreign Sanctions Law, so as to advance the development of China’s legal framework for extraterritorial application.

In parallel, on March 31, 2026, the State Council issued new regulations on safeguarding the security of industrial and supply chains, which also provide for legal countermeasures against discriminatory restrictions imposed by foreign actors. These measures further reinforce China’s emerging system for responding to external economic and legal pressure.

Full translation of the Regulation (unofficial):

Regulations of the People’s Republic of China on Countering Improper Extraterritorial Application of Foreign Laws

Article 1
These Regulations are formulated in accordance with the National Security Law of the People’s Republic of China, the Foreign Relations Law of the People’s Republic of China, the Anti-Foreign Sanctions Law of the People’s Republic of China, and other relevant laws, in order to safeguard national sovereignty, security, and development interests, protect the lawful rights and interests of Chinese citizens and organizations, and uphold the international order based on international law.

Article 2
Work on countering improper extraterritorial application of foreign laws shall implement a holistic approach to national security, coordinate development and security, and balance domestic and international priorities, so as to safeguard the socialist system with Chinese characteristics and promote the building of a more just and equitable global governance system.

Article 3
The People’s Republic of China adheres to an independent foreign policy of peace, opposes hegemonism and power politics, and opposes any country interfering in China’s internal affairs under any pretext or in any manner.

Where a foreign state, in violation of international law and the basic norms governing international relations, adopts improper extraterritorial measures that endanger China’s sovereignty, security, or development interests, or harm the lawful rights and interests of Chinese citizens or organizations, the Chinese government has the right to take corresponding measures.

Article 4
In accordance with the laws of the People’s Republic of China, treaties concluded or acceded to by the People’s Republic of China, or on the basis of reciprocity, the Chinese government has the right to exercise extraterritorial jurisdiction over acts that have an appropriate connection with China, so as to safeguard national sovereignty, security, and development interests and protect the lawful rights and interests of Chinese citizens and organizations.

Where the Chinese government exercises jurisdiction over relevant acts pursuant to the preceding paragraph, and a foreign state also asserts jurisdiction over the same acts, the parties may resolve the matter, on the basis of compliance with international law and the basic norms governing international relations, through treaties, diplomatic channels, or consultations between competent authorities.

Article 5
The State shall establish and improve a working mechanism for responding to improper extraterritorial application of foreign laws (hereinafter referred to as the “working mechanism”), to coordinate such efforts in an integrated manner.

Relevant departments under the State Council shall, in accordance with their respective responsibilities, undertake specific work in responding to improper extraterritorial measures. These departments and other relevant authorities shall strengthen coordination, cooperation, and information sharing in identifying and responding to such measures.

Article 6
The department in charge of rule of law under the State Council, together with other relevant authorities, shall carry out the identification of improper extraterritorial measures, and may conduct investigations and external consultations. Relevant organizations and individuals may submit proposals to initiate such identification work.

In conducting identification, the following factors shall be comprehensively considered:
(1) Whether the measure violates international law and the basic norms governing international relations;
(2) Whether there is an appropriate connection between the conduct subject to extraterritorial jurisdiction and the foreign state concerned;
(3) Whether it endangers China’s sovereignty, security, or development interests, or harms the lawful rights and interests of Chinese citizens or organizations;
(4) Other relevant factors.

Where a measure is identified as constituting improper extraterritorial application of foreign laws, the department in charge of rule of law under the State Council may make an announcement to that effect. No organization or individual may execute or assist in executing such measures.

Where, under special circumstances, a Chinese citizen or organization must execute or assist in executing such measures, it shall apply to the said department, provide relevant facts and reasons, and specify the scope. Upon approval through the working mechanism, such execution or assistance may be permitted within a specified scope.

Article 7
The Chinese government may assess acts by relevant states involving improper extraterritorial measures, determine risk levels, and take countermeasures and restrictive measures in areas such as foreign affairs, entry and exit, trade, investment, international cooperation, and foreign aid, in accordance with law.

Article 8
Relevant departments under the State Council may, pursuant to the working mechanism, include foreign organizations and individuals that promote or participate in the implementation of improper extraterritorial measures in a “List of Unreliable Entities,” and, in accordance with the Anti-Foreign Sanctions Law and its implementing provisions, decide to adopt one or more of the following countermeasures and restrictive measures, and make them public:
(1) Refusal to issue visas, denial of entry, cancellation of visas, orders to leave within a time limit, repatriation, or deportation;
(2) Cancellation or restriction of qualifications for work, stay, or residence in China;
(3) Seizure, impoundment, or freezing of movable property, immovable property, and other types of assets within China;
(4) Prohibition or restriction on Chinese organizations and individuals from providing data or personal information, or engaging in transactions or cooperation;
(5) Prohibition or restriction on import and export activities related to China;
(6) Prohibition or restriction on investment in China;
(7) Prohibition or restriction on the entry of products, transportation tools, etc.;
(8) Fines;
(9) Other necessary measures.

The above measures may also apply to organizations actually controlled by, or established or operated with the participation of, listed entities or individuals.

Article 9
Organizations or individuals subject to countermeasures and restrictive measures may apply to the relevant State Council departments for suspension, modification, or cancellation of such measures, providing facts and reasons such as corrective actions taken and elimination of consequences.

The relevant departments may assess the implementation and effectiveness of such measures based on actual circumstances.

Based on assessment results or review of applications, the relevant departments may, pursuant to the working mechanism, decide to suspend, modify, or cancel such measures and make the decision public.

Article 10
Where implementation of countermeasures requires action by other State Council departments, the department that made the decision shall notify the relevant departments in accordance with the working mechanism.

Relevant departments shall implement such measures according to their respective responsibilities.

Article 11
Where, under special circumstances, organizations or individuals must engage in otherwise prohibited or restricted activities with entities or individuals subject to countermeasures, they shall apply to the relevant State Council department, provide facts and reasons, and may proceed within an approved scope upon authorization.

Article 12
Relevant State Council departments may take measures such as on-site inspections and reviewing or copying relevant materials against organizations or individuals suspected of executing or assisting improper extraterritorial measures. Relevant parties shall cooperate and shall not refuse or obstruct.

Article 13
Relevant State Council departments may conduct interviews with, and order rectification by, organizations or individuals executing or assisting such measures.

The department in charge of rule of law under the State Council may, pursuant to the working mechanism, issue decisions prohibiting execution of improper extraterritorial measures (hereinafter “prohibition orders”). Relevant parties shall comply.

Article 14
Where any organization or individual executes or assists in executing improper extraterritorial measures, thereby infringing upon the lawful rights and interests of Chinese citizens or organizations, the affected parties may file a lawsuit with a people’s court in accordance with law, seeking cessation of infringement and compensation for losses.

Article 15
Relevant departments of people’s governments at or above the provincial level shall, within their respective responsibilities, provide guidance and services to Chinese citizens and organizations in responding to improper extraterritorial measures.

Article 16
Industry associations and chambers of commerce shall, in accordance with laws, regulations, and their charters, play roles in self-regulation and coordination, guide members to operate in compliance with laws, promptly reflect industry concerns, and provide services in market expansion, rights protection, and dispute resolution related to responding to improper extraterritorial measures.

Article 17
Where any organization or individual refuses to comply with or circumvents countermeasures and restrictive measures, or violates prohibition orders, relevant State Council departments may order rectification, prohibit or restrict participation in government procurement, bidding, import and export of goods and technologies, or international trade in services, restrict cross-border data flows and provision of personal information, restrict entry and exit or stay in China, and impose fines.

Article 18
Where violations of these Regulations constitute a crime, criminal liability shall be pursued in accordance with law.

Article 19
Where matters relating to countering improper extraterritorial measures involve anti-corruption, anti-monopoly, anti-unfair competition, export control, data security, or judicial assistance, and relevant laws and regulations provide otherwise, such provisions shall apply.

Where other provisions exist regarding responses to foreign states that improperly prohibit or restrict normal economic and trade activities between Chinese citizens or organizations and third countries (or regions), such provisions shall apply.

Article 20
These Regulations shall enter into force upon promulgation.