China’s anti-foreign sanctions regime enters new era of enforcement

China’s anti-foreign sanctions framework has evolved significantly in recent years following the promulgation and implementation of the Anti-Foreign Sanctions Law (AFSL) in June 2021, establishing the fundamental legislative architecture governing China’s approach to countermeasures against foreign restrictive actions.

In March 2025, the State Council issued the Regulations on the Implementation of the AFSL (Implementation Regulations), marking another important milestone in China’s efforts to improve the structure and effectiveness of its anti‑foreign sanctions regime.

In 2026, as geopolitical tensions marked by the ongoing escalation in the US-China relationship continue to intensify worldwide, China’s anti-foreign sanctions framework enters a new phase characterised by more assertive and effective enforcement.

Countermeasures and unreliable entities

Prior to the AFSL, several key regulatory instruments issued by the Ministry of Commerce – including the Provisions on the Unreliable Entity List (UEL) and the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures – formed essential components of China’s broader anti-foreign sanctions framework, targeting foreign entities that harm China’s national sovereignty, security, or development interests, or that violate normal market transaction principles when dealing with Chinese entities.

Under the AFSL, China may adopt corresponding countermeasures when a foreign state violates international law or basic norms of international relations by invoking various pretexts – or its domestic legislation – to suppress or contain China, or when it imposes discriminatory or restrictive measures on Chinese citizens or organisations in a manner that interferes with China’s internal affairs.

Organisations and individuals found in violation of the AFSL’s provisions are subject to a range of countermeasures. These parties may be added to the Countermeasures List maintained by relevant State Council authorities, thereby exposing them to substantial restrictions. These include the denial of visa issuance or entry into China, visa cancellation and deportation, as well as the seizure, distraint, or freezing of their property within China.

They may also be prohibited or restricted from engaging in transactions, cooperation, or other activities with parties in China. These countermeasures can extend to affiliated parties, including family members, senior executives, actual controllers, and entities under their control.

In recent years, the UEL has been applied alongside the Countermeasures List as part of China’s broader anti-foreign sanctions toolkit. In practice, entities designated on the Countermeasures List may also be included on the UEL, resulting in a degree of overlap between the two regimes.

However, the Countermeasures List is characterised by a broader scope and more comprehensive consequences. The UEL functions primarily as a trade‑focused regulatory instrument, imposing comparatively moderate restrictions such as limitations on import and export activities, investment, personnel entry, and permits, as well as administrative fines. Although the Countermeasures List may reach affiliated individuals and entities, the UEL does not extend sanctions to affiliates.

Implementation Regulations

Since 2025, the Implementation Regulations have broadened the AFSL’s scope of application. Where the AFSL primarily targeted foreign measures viewed as interfering in China’s internal affairs, the Implementation Regulations elevate “harm to China’s sovereignty, security, and development interests” to a co‑equal basis for imposing countermeasures.

This adjustment extends the regime to a wider set of external actions that may constrain China’s strategic, economic, or security interests. The regulations also bring foreign litigation deemed detrimental to these interests further within scope, crucially enabling China to respond to politically motivated suits filed abroad.

The regulations also specify the consequences of non-compliance and detail both the substance and administration of countermeasures. They empower relevant State Council authorities to conduct interviews, order rectification, and adopt appropriate measures against parties that implement or assist in implementing foreign discriminatory restrictive actions.

The regulations also strengthen the AFSL by outlining both the substance and administration of countermeasures. For example, they further specify asset‑based measures by defining attachable property to include cash, securities, equity interests, intellectual property, and other intangible rights, thereby providing a more precise delineation of the types of assets that may be subject to seizure or freezing. In addition, activity‑based prohibitions are more specifically articulated to encompass sectors such as education, technology, legal services, culture, health, and environmental protection, ensuring clearer guidance on the scope of restricted dealings with designated parties.

The regulations also clarify the scope of “other necessary measures,” expressly addressing restrictions on imports and exports, investment activities, access to data and personal information, and immigration‑related approvals, as well as the imposition of administrative fines.

Taken together, these refinements enhance the transparency and operability of countermeasures under the AFSL. To ensure coherent implementation, the regulations distribute enforcement responsibilities across State Council authorities. Financial, customs and intellectual property agencies are tasked with enforcing asset‑related measures, while the authorities responsible for education, technology, justice, commerce, culture, health, and sports administer sector‑specific restrictions. This division of responsibilities establishes a coordinated and clearly structured enforcement framework.

In addition to being subjected to countermeasures, organisations or individuals that violate the AFSL may also face civil litigations since article 12 of the AFSL allows Chinese citizens and organisations to file lawsuits in Chinese courts, seeking cessation of the infringement and compensation for losses, if their lawful rights are harmed by the foreign discriminatory restrictive measures.

The regulations also prohibit the enforcement of judgments arising from such foreign proceedings. Together, these provisions provide a more detailed liability framework and reinforce the deterrent effect of China’s countermeasures regime.

Litigation as an enforcement channel

On the judicial front, the Supreme People’s Court's recent recognition of the first civil case applying the AFSL is extremely significant.

Cases admitted into the People’s Courts Case Database are selected and approved by the Supreme People’s Court and serve as references that guide the adjudication of similar cases by courts at all levels in China. This case’s inclusion in the database not only underscores the growing role of the AFSL in China’s judicial practice, it also signals that private litigation is also emerging as a meaningful sanctions enforcement channel.

The dispute arose after a Chinese company was designated by the US Office of Foreign Assets Control (OFAC) as a Specially Designated National (SDN) in June 2024, leading the foreign counterparty to withhold approximately RMB 83.9 million ($12.7 million) in payments owed for services performed in China.

In September 2024, the Nanjing Maritime Court granted the plaintiff’s request for a preliminary injunction, ordering the seizure of the defendant’s vessel located in China. The plaintiff subsequently filed an AFSL civil claim under article 12, which the court accepted.

Following judicial clarification of the consequences of assisting foreign unilateral sanctions, both parties opted for court‑facilitated mediation. The defendant then secured a specific OFAC licence allowing it to provide security funds to the court. On 19 November 2024, the court issued a civil mediation agreement under which the defendant paid RMB 99.7 million as counter‑security, enabling release of the vessel, and the plaintiff received full payment of the outstanding amounts.

It is noteworthy that, although the underlying contract contained an arbitration clause, the Chinese court still accepted jurisdiction over the plaintiff’s AFSL claim, and the defendant ultimately waived arbitration after the court explained the legal consequences of assisting foreign unilateral sanctions.

While the court did not resolve whether article 12 overrides arbitration agreements, the case confirms that Chinese companies may invoke a private right of action when foreign counterparties refuse to perform contractual obligations on the basis of foreign sanctions.

Expanded enforcement tools and scope

China’s anti‑foreign sanctions enforcement activity remained highly active throughout 2025 and was marked by the expanded use of the UEL as a core enforcement tool.

Publicly available data indicates that 103 organisations and individuals were designated under the Countermeasures List and the UEL, only slightly lower than the 121 recorded in 2024.

Among the 103 sanctioned entities, 67 were added to the UEL, compared with only 3 designations in 2024, and only 2 designations in 2023. This sharp increase demonstrates that the UEL has assumed a far more prominent role within China’s anti-foreign sanctions architecture in 2025.

In 2025, Taiwan‑related issues remained the predominant trigger for sanctions. Enforcement actions linked to arms sales to Taiwan, as well as cooperation involving military technologies or military‑related services, accounted for approximately 91% of all sanctions-related cases in 2025.

The majority of sanctioned entities were US military companies or technology companies with longstanding military ties with Taiwan. These designations were typically accompanied by strong official statements emphasising China’s sovereignty and territorial integrity, reflecting the growing link between enforcement actions and broader geopolitical messaging.

There has also been a noticeable shift towards broader sectoral expansion of targeted entities. Beyond military‑aligned companies, in 2025 China imposed consequences on firms in consumer goods and biotechnology, signalling a trend to scrutinise a wider range of commercial behaviour.

In February 2025, for example, a US fashion company and a US biotechnology company were added to the UEL for allegedly violating normal commercial principles, interrupting ordinary business transactions with Chinese enterprises, and adopting discriminatory measures against them. These cases marked one of the first instances in which non‑military companies were targeted under the UEL based on alleged market‑behaviour grounds rather than geopolitical considerations alone.

Collectively, these trends indicate that China’s enforcement activities are becoming more structured, more diversified, and more deeply embedded in its broader regulatory system. In 2026, entities across an expanding range of diverse industries may face heightened scrutiny as enforcement tools – particularly the UEL – continue to evolve in both scope and application.

Business outlook

On the regulatory side, the issuance of the Implementation Regulations has clarified enforcement responsibilities across Chinese government agencies and expanded the operational toolkit available to regulators. This enhanced institutional coordination is expected to support a more consistent and assertive application of anti-foreign sanctions measures in 2026.

Domestically, private litigation will increasingly emerge as a meaningful tool for Chinese companies seeking relief against foreign discriminatory measures. As judicial practice continues to develop, foreign entities operating in China may face a greater likelihood of being involved in AFSL‑related disputes, whether directly or indirectly.

At the same time, geopolitical tensions – particularly those involving major powers – are likely to generate a broader range of triggers for China’s anti-foreign sanctions responses, contributing to a more active enforcement posture.

Against this backdrop, China’s anti-foreign sanctions enforcement landscape is expected to intensify in 2026, driven by both regulatory and judicial developments as well as an increasingly volatile geopolitical environment.

Given these dynamics, businesses operating in or with Chinese entities should closely monitor developments in China’s anti-foreign sanctions regime, including new implementing rules, judicial interpretations, and representative enforcement cases.

Companies are advised to conduct proactive assessments of potential exposure to sanctions‑related risks and to seek timely professional guidance when navigating conflicting legal obligations across jurisdictions.

In an era of expanding and increasingly complex sanctions and export control regimes worldwide, maintaining agile and well‑coordinated compliance strategies will be essential for mitigating operational, legal, and reputational risks.