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 the 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 the Rules on Blocking the Unjustified Extraterritorial Application of Foreign Laws and Measures (the “2021 Blocking Rules”)1. At the time, the 2021 Blocking Rules were notable as a statement of policy, but their practical significance remained uncertain because they 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 the 2021 Blocking Rules and, last month, adopted two new State Council regulations that materially expand the legal framework in this area: the Regulations on Countering Improper Foreign Extraterritorial Jurisdiction (the “2026 Countering Measures”)2 and the Provisions on the Security of Industrial and Supply Chains (the “2026 Supply Chain Provisions”)3. Taken together, these 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) (the “Announcement”). 4
In the Announcement, MOFCOM stated that, following a comprehensive assessment under the Anti-Foreign Sanctions Law, the 2021 Blocking Rules, and other 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. The U.S. measures included placing those Chinese companies on the Specially Designated Nationals (“SDN”) List, as well as imposing asset freezes and transaction prohibitions.
The 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 the 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. The 2026 Countering Regulations
Background
The 2026 Countering Regulations build on these developments and represent a substantial legal upgrade from the 2021 blocking regime. The 2021 Blocking Rules were MOFCOM-administered administrative rules with a relatively narrow scope. They 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, the 2026 Countering Regulations operate at the 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 the regime more squarely within China’s wider legal framework on national security and foreign relations, including the National Security Law, the Foreign Relations Law, and the Anti-Foreign Sanctions Law.
Identifying Improper Foreign Extraterritorial Jurisdiction Measures
One of the most significant features of the 2026 Countering Regulations is that they 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 the Regulations, the authorities will consider whether a foreign measure violates international law or basic international norms, whether the foreign country has a sufficient connection to the conduct at issue, whether the measure harms China’s sovereignty, security, or development interests, and whether it damages the lawful rights and interests of Chinese citizens or organizations. This marks a meaningful development from the 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, the Regulations prohibit organizations and individuals from recognizing, enforcing, or assisting in the enforcement of that measure. Depending on how these provisions are applied in practice, the 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 the provision of information in support of enforcement processes.
Limited Exceptions for Compliance with Foreign Sanctions
The Regulations also provide an exemption mechanism for special circumstances, reflecting the 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 the State Council authority responsible for rule-of-law affairs, explain the relevant facts and reasons, and specify the scope of the requested compliance or assistance. If approved through the applicable working mechanism, it may do so within the approved scope. This mechanism is important because it offers a limited avenue for managing direct legal conflicts rather than assuming absolute non-compliance in all cases.
Liability for Non-Compliance
Another major development is the introduction of clearer legal consequences for violations. The 2021 Blocking Rules were often viewed as lacking visible enforcement mechanisms. The 2026 Countering Regulations address that concern by expressly authorizing administrative penalties and corrective measures. These 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 the ability to stay or reside in China, fines, and, in serious cases, criminal liability. This materially raises the 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, the regime now carries more explicit enforcement force.
A Shift from Passive Blocking to Active Countermeasures
The most important conceptual shift, however, is that the 2026 Countering Regulations move beyond passive blocking and toward active countermeasures. The 2021 Blocking Rules were primarily defensive in nature, aiming to blunt the domestic effect of foreign laws or measures deemed unjustified. The 2026 Countering Regulations add a more affirmative response mechanism, including the potential designation of foreign entities or individuals that promote or participate in the 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. The 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
The 2026 Countering Regulations also expand the 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 the 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 other forms of support where they suffer significant harm. This aspect of the regime is important because it gives the framework a more practical domestic function. For companies doing business in China, it raises the prospect that counterparties may invoke these tools in disputes arising from sanctions-related suspensions, contract terminations, delivery refusals, or payment blocks.
IV. The 2026 Supply Chain Security Provisions
Background
The second major recent development—the Supply Chain Security Provisions—must be understood in parallel with the anti-extraterritoriality measures. While these provisions are not limited to sanctions or long-arm jurisdiction, they are closely connected in policy considerations. They 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. The Provisions establish China’s first dedicated administrative regulation on industrial and supply chain security. They place overall coordination at the 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 the Provisions is the 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. These sectors are likely to receive focused monitoring, support, and intervention. For companies operating in or supplying these sectors, that could translate into greater scrutiny, higher reporting expectations, and a stronger emphasis on contingency planning and localization.
Company-Level Compliance Responsibilities
The Provisions also impose direct responsibilities on enterprises. Companies, especially those in the critical sectors, may be expected to create supply chain risk registers, undertake compliance reviews, report risks periodically, and implement security safeguards. There is also an apparent policy preference for strengthening indigenous capabilities, including increased research and development, domestic substitution, and coordinated resilience efforts across the 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
The Provisions become especially significant when read together with their countermeasure tools. Where foreign actors are said to engage in discriminatory restrictions, technology blockades, long-arm sanctions, or coercive supply disruptions targeting China, the Provisions authorize investigations and the 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
The Provisions are also noteworthy for their treatment of data and information collection. The Provisions state that organizations and individuals may not conduct unauthorized investigations or information gathering 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 another layer of caution.
Multinationals may need to assess more carefully whether 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 the US, EU, UK, and other territories, and their global compliance systems are often built around centralized screening, escalation, and business restrictions. At the 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 them. The 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 whether to terminate a customer, freeze a transaction, suspend exports, disclose information, or comply with a foreign order—are often made outside China and then implemented locally. Under China’s evolving blocking and countermeasures framework, that model may expose the China entity and its personnel to direct regulatory risk, especially where local operations are viewed as implementing improper foreign extraterritorial measures. Multinational corporations may therefore 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 the same conduct.
Importantly, it would be too simplistic to read these 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. The practical challenge, therefore, is not to choose one legal regime over another in the 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 their sanctions and export control compliance processes as they 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 these 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 strengthened.
Ultimately, China’s latest measures reflect more than a technical regulatory update. They signal a broader effort to strengthen China’s ability to resist foreign legal pressure, protect domestic entities, and preserve strategic economic continuity. The 2021 Blocking Rules are now significant not only as a matter of policy but also because they are being used in practice. The 2026 Countering Regulations expand that framework into a broader administrative system with stronger prohibitions, countermeasures, and remedies. The new industrial and supply chain security provisions further connect these issues to national security, resilience, and sector-specific regulation.
For multinational corporations in China, the 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.
For further information, please contact:
Kenneth Zhou, Partner, JunHe
Zhou_Kenneth@junhe.com
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
