China Issues New Regulations on Countering Foreign Extraterritorial Jurisdiction: What MNCs Need to Know

On April 7, 2026, China’s State Council simultaneously promulgated two major regulations, completing a systemized countersanctions framework: the Regulations on Countering Foreign Improper Extraterritorial Jurisdiction (Decree No. 835) and the Regulations on the Security of Industrial and Supply Chains (Decree No. 834). Both took effect immediately upon publication with no grace period.

A close textual analysis reveals that these decrees [1] do not introduce entirely new legal concepts but rather systematize, elevate, and selectively expand a toolkit developed since 2020, integrating elements from the Unreliable Entity List (UEL), MOFCOM Blocking Rules, Anti-Foreign Sanctions Law (AFSL), and AFSL Implementation Regulations.

China has transitioned from ad hoc countermeasures to a comprehensive, multiagency countersanctions legal framework capable of addressing commercial conduct, regulatory compliance decisions, and cross-border legal conflicts.

For a detailed breakdown of Degree No. 834, see our April 8 LawFlash.

WHAT THIS MEANS FOR YOUR BUSINESS

• Compliance Is Now a Multifront Exposure: A single corporate action, such as terminating a supplier to comply with US export controls, can now simultaneously trigger supply chain investigations (Decree 834), extraterritorial jurisdiction countermeasures (Decree 835), AFSL countersanctions, and UEL designation.
• Jurisdictional Position: Decree 835 can be read as articulating China’s position on exercising jurisdiction over conduct with an “appropriate connection” to China, increasing risk for offshore decisions.
• Expanded Definition of Sanctionable Conduct: The new “Malicious Entity List” targets those who “promote” foreign sanctions. This may be interpreted to potentially capture public advocacy, lobbying, or urging industry peers to sever ties with Chinese entities, even without direct implementation.
• Supply Chain Diligence Is Under Scrutiny: Decree 834 introduces new restrictions on supply chain information collection, creating direct conflicts for companies attempting to comply with EU CSDDD or US UFLPA requirements.

Elevated Personal Risk: Decree 835 includes provisions referencing potential criminal liability under applicable law, escalating enforcement beyond the administrative penalties and exit bans seen in prior instruments.

THE EVOLUTION OF CHINA’S COUNTERSANCTIONS TOOLKIT (2020–2026)

The April 2026 decrees build on a multiyear framework, detailed below.

WHAT THE APRIL 2026 DECREES ACTUALLY ADD

The following distinguishes what is genuinely new from what reflects consolidation or elevation of existing tools.

Genuinely New Mechanisms (Not Present in Any Prior Instrument)

Assertion of China’s Own Extraterritorial Jurisdiction (The Cornerstone Clause): Decree 835 (Article 4) can be read as articulating China’s position on exercising jurisdiction over conduct with an “appropriate connection” (适当联系) to China, representing a shift from defensive blocking to an active jurisdictional stance. The undefined standard provides Chinese authorities with significant flexibility in determining the jurisdictional boundary for offshore conduct. In practice, this may extend regulatory exposure to offshore decisions where the impact on Chinese entities or interests is deemed sufficiently connected.

The Malicious Entity List (恶意实体清单) and Piercing Rules: Decree 835 introduces a new designation targeting those who “promote or participate in implementing” foreign improper extraterritorial jurisdiction measures. The word “promote” (推动) significantly expands sanctionable conduct, which may extend beyond direct implementation to broader forms of support or advocacy.

Decree 835 also introduces “piercing” rules, i.e., countermeasures that can be extended to entities “actually controlled by or participated in establishing or operating” by the listed entity, creating significant compliance risks for multinational corporate structures.

Potential Criminal Liability: Decree 835 (Article 12) references potential criminal liability for individuals who violate its provisions, a significant escalation from the purely administrative penalties in prior instruments.

Supply Chain Information Collection Restrictions: Decree 834 (Article 13) restricts “investigations and other information collection activities related to industrial and supply chains” by foreign entities in China, creating a direct conflict with EU CSDDD and US UFLPA due diligence requirements.

“Threat of Harm” Investigative Standard: Decree 834 (Article 15) allows Chinese authorities to investigate foreign entities based on conduct that “poses a threat of causing actual damage” to supply chains, a lower threshold than the actual harm or discriminatory conduct required by the UEL or AFSL.

Elevated or Repackaged Mechanisms (Existed Before, Now at Higher Authority Level)

Blocking Orders and Progressive Enforcement: The core prohibition on complying with foreign measures has existed since the 2021 MOFCOM Blocking Rules. Decree 835 repackages this as Prohibition Execution Orders (禁执令) with a greater role for the Ministry of Justice. Notably, it establishes a progressive enforcement logic (warnings/corrections before formal orders).

Private Right of Action: The right of Chinese entities to sue parties who comply with foreign measures (available since 2021) is restated in Decree 835 without material change.

Designation List Penalties: Consequences for listed entities (trade restrictions, asset freezes, visa bans) remain largely identical across the UEL, AFSL, and the new Malicious Entity List.

ENFORCEMENT TRACK RECORD: FROM DORMANT TO HIGHLY ACTIVE

China’s countersanctions enforcement has shifted from largely declaratory to increasingly operational, as reflected in the following developments:

• UEL Escalation: UEL enforcement increased sharply, with 67 designations in 2025 compared to only three in 2024. [4]
• AFSL Designations: AFSL enforcement remains highly active, with over 100 organizations and individuals designated in 2025 across the Countermeasures List and UEL. [5]
• Emergence of Private Litigation: The private right of action is no longer theoretical, highlighted by a 2024 Nanjing Maritime Court AFSL civil claim resulting in a RMB 99.7 million settlement, which the Supreme People’s Court admitted to its Case Database in 2025. [6]

IMPLEMENTATION UNCERTAINTY AND THE NEED FOR GUIDANCE

Despite the immediate effective date of both Decree 834 and Decree 835, significant implementation uncertainty remains. Neither the State Council nor the respective enforcement ministries (MOJ for Decree 835, MOFCOM/MIIT for Decree 834) have issued detailed implementing guidelines or enforcement rules.

Crucial terms remain undefined, including what constitutes “interrupting normal transactions,” the boundaries of “improper extraterritorial jurisdiction,” and the exact scope of “promotion” in the Malicious Entity List context. Companies must navigate these new rules without detailed implementation guidance. [7]

THE INTERLOCKING EFFECT: HOW THE SYSTEM WORKS TOGETHER

These instruments operate in combination, meaning a single corporate decision may trigger multiple parallel actions across agencies.

As a result, companies face overlapping regulatory exposure rather than isolated compliance risks.

WHERE THE REAL RISK LIES: THREE HIGH-RISK SCENARIOS

Based on the systematized framework, the most immediate risk arises where routine business decisions intersect directly with foreign compliance obligations. These concentrate in three specific operational areas:

• Commercial Termination Decisions: Terminating a Chinese supplier or customer to comply with foreign sanctions or export controls is now the highest-risk activity. It simultaneously triggers the UEL, AFSL, Decree 834, and Decree 835, exposing the company to both administrative designation and civil litigation by the terminated party.
• Supply Chain Due Diligence: Conducting ESG, forced labor, or supply chain audits in China to comply with the EU CSDDD or US UFLPA directly conflicts with the information collection restrictions in Decree 834. Standard due diligence questionnaires and on-site inspections may attract scrutiny under a national security framework.
• Internal Compliance Policies: Blanket corporate policies that automatically mandate compliance with foreign sanctions across all global operations (including China subsidiaries) may be viewed as “implementing” or “promoting” improper extraterritorial jurisdiction under Decree 835.

ACTION ITEMS: WHEN TO DO WHAT, AND WHY

Companies should expect that regulatory expectations will continue to evolve, particularly in areas involving supply chain decisions, data flows, and cross-border compliance. We recommend the following prioritized actions:

• [Immediate Priority] Carefully Reassess Termination Decisions: Why: Terminations are the most visible trigger for retaliation and multiagency enforcement.
• [Immediate Priority] Consider Pausing or Adjusting Supply Chain Audits: Why: Decree 834 restricts supply chain information collection, directly impacting ESG and forced labor audits.
• [Near-Term Priority] Revise Contractual Protections: Why: The private right of action exposes companies to civil liability in Chinese courts for complying with foreign sanctions.
• [Near-Term Priority] Prepare Exemption Application Protocols: Why: Decree 835 allows for exemptions from Prohibition Execution Orders in special circumstances.
• [Ongoing Priority] Reassess Executive Exposure: Why: Explicit criminal liability and exit bans significantly elevate personal risk for executives in China.
More broadly, these developments suggest that China is moving toward a framework in which cross-border legal conflicts are no longer treated as isolated compliance issues, but rather matters of systemic regulatory coordination.