The latest 2025 revision of China’s Maritime Code now represents a significant attempt to modernise this area of marine insurance law. Although the reform does not fully mirror the approach of the UK Insurance Act 2015, it clearly departs from the traditional “all or nothing” consequences of breach of warranty, achieving a more balanced allocation of risk between insurer and insured.

Risk-based liability

Under article 235 of the earlier Maritime Code 1992, an insurer could terminate the contract or amend the insurance terms once a warranty was breached. The provision, however, said little about how these rights operated in practice.

In particular, the code did not clarify when termination became effective or whether the insurer remained liable for losses occurring after breach but before termination. This legislative silence created substantial uncertainty.

The position in English law had meanwhile already changed considerably following the Insurance Act 2015. The traditional rule under the historic Marine Insurance Act 1906 – where breach of warranty automatically discharged the insurer from liability – was abolished.

Instead, breach merely suspends liability until the breach is remedied. Section 11 of the 2015 act further prevents insurers from relying on breaches unrelated to the actual loss. The reform was widely regarded as an attempt to soften the harshness of traditional warranty doctrine.

China’s revised Maritime Code 2025 now appears to have been influenced by these developments. Article 261 expressly regulates the insurer’s right of termination following breach of warranty. The insurer must notify the insured in writing and termination only takes effect once the notice reaches the insured.

This clarification aligns marine insurance law more closely with general contract principles and resolves a longstanding ambiguity under the previous regime. The new provision also introduces a clearer allocation of liability across different periods. Losses occurring before the breach remain recoverable, while losses after termination are excluded.

More importantly, the revised code now addresses the “gap period” between breach and termination. During this interval, the insurer is generally exempt from liability.

But two important exceptions apply: first, the insurer remains liable if the insured proves the breach had no influence on the occurrence of the maritime peril; and second, liability continues where the breach had already been remedied before the loss occurred.

These exceptions significantly reduce the severity of the traditional warranty doctrine. Taken together, they suggest that the revised regime no longer allows insurers to rely automatically on every breach of warranty, but instead considers whether the breach had any influence on the occurrence of maritime peril.

Although the revised code adopts the term “influence” rather than “causation”, the legal effect is similar. Insurers can no longer rely as easily on purely technical breaches that bear no connection to the loss itself. In this respect, the reform reflects a broader international trend towards proportionality and fairness in insurance law.

Open questions

The revised Maritime Code also strengthens procedural protection for insured parties. Article 249 now requires insurers using standard-form clauses to draw attention to terms materially affecting the insured’s interests, including deductible clauses or exclusion clauses.

Upon request, insurers must also explain such clauses clearly. Failure to do so may prevent the clause from becoming part of the contract unless the insurer can show the insured knew, or ought to have known, its content.

This reform is particularly important in the context of warranty clauses, which traditionally operate as strict risk-allocation mechanisms. In practice, the insured may not fully appreciate the legal effect of breach. The new notice-and-explanation requirement therefore improves procedural fairness and limits the possibility of insurers relying on obscure standard terms.

Nevertheless, uncertainties remain. Notably, the revised code still does not provide a statutory definition of “warranty”. Earlier draft proposals reportedly attempted to define the concept by reference to English law, but the final version omitted such provisions. As a result, uncertainty persists regarding which clauses constitute warranties and how warranties should be distinguished from exclusion clauses or conditions precedent.

This omission matters because Chinese courts traditionally rely heavily on statutory interpretation rather than judicial precedent. Previous cases have demonstrated inconsistent approaches to warranty clauses. Some courts required warranties to be expressly stated in writing, while others recognised implied warranties based on trade usage and commercial practice.

Without clearer statutory guidance, similar inconsistencies are likely to continue.

The revised code also removes previous requirements that the insured immediately notifies the insurer upon breach of warranty. While this avoids imposing excessive procedural burdens on the insured, it may create new disputes concerning when the insurer acquired knowledge of the breach – and whether termination rights were exercised within a reasonable time.

Takeaway

Overall, China’s updated Maritime Code 2025 marks a meaningful step towards a more balanced system of marine insurance law. The reform improves the previous regime by clarifying termination procedures, limiting the legal effect of breach and introducing a more flexible risk-based approach.

At the same time, the absence of a clear definition of warranties means that judicial interpretation will continue to play a central role in shaping the practical boundaries of the new regime.

Still, compared with the strict traditional approach inherited from English marine insurance law, the revised system is more moderate and commercially realistic. Although the reform remains incomplete, it represents an important transition in the development of Chinese marine insurance law.

Shengnan Jia is a partner at Tahota Law Firm and a PhD in commercial and maritime law from City St George’s, University of London. She can be reached by phone at +86 139 1113 4604 and by email at shengnan.jia@tahota.com.

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Gao told China Business Law Journal: “As the global general counsel of a China-rooted Fortune Global 500 company, I hope to leverage AI skills and tools to gradually build a world-class legal and compliance team and system amid a complex and rapidly evolving geopolitical environment, in order to better support Midea Group’s B2C core business, B2B strategic transformation and global expansion strategy.”

Gao brings more than 20 years of in‑house legal experience across industries including logistics, retail, hospitality and consumer electronics.

He began his legal career at Ericsson China, serving as legal counsel from 2003 to 2005. He subsequently held senior legal roles, including head of legal for DHL Express China; senior director of legal and corporate affairs at The Home Depot in China; vice president for Greater China and deputy general counsel (global) at InterContinental Hotels; and senior vice president and general counsel at Yihaodian.

From 2017 to 2020, he served as senior director of growth for real estate and M&A within Walmart’s global compliance department, before joining Lenovo Group.

In addition to his corporate legal work, Gao serves as an arbitrator with CIETAC, the Beijing Arbitration Commission, the Shenzhen Court of International Arbitration and the Shanghai International Arbitration Centre.

He is also an antitrust expert appointed by the Beijing Municipal Administration for Market Regulation, the capital’s market regulator.

Gao has been recognised multiple times in China Business Law Journal’s In-house Counsel Awards.

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Huang is the former managing partner of East & Concord Partners in Hangzhou and the formalities to finalise his partnership at Han Kun are underway.

Huang has more than 20 years of practice experience, focusing on cross‑border investment, private equity and financing, and cross‑border dispute resolution.

He previously served twice as a partner at Grandall Law Firm, from 2007 to 2010 and again from 2020 to 2021. Between 2014 and 2020, he was a partner at Guantao Law Firm, all based in Hangzhou.

In 2021, Huang joined East & Concord’s Hangzhou office as a partner, where he established and led the firm’s international practice team. Prior to joining Han Kun, he served as managing partner of the Hangzhou office and as a senior partner in investment, M&A and international business.

In addition to private practice, Huang has in‑house experience. From 2010 to 2013, he was general counsel of Meien AMSC, a subsidiary of US clean energy company American Superconductor (AMSC). In 2014, he served as chairman’s assistant and general counsel at Canature Health Technology (formerly Canature Environmental Products), a provider of water treatment solutions.

Huang has received recognition in China Business Law Journal’s A-List: Growth Drivers��in 2023. His representative cases include Suning Sports’ series A financing and the series of disputes between Sinovel Wind Group and AMSC, both of which were recognised as Deals of the Year in 2018 by��China Business Law Journal.

Han Kun’s Hangzhou office commenced operations in April 2026, marking its 10th office globally.

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Regulatory harmonisation

For years, the original Maritime Code imposed special restrictions on the carriage of goods by sea between domestic ports, fragmenting the rules governing domestic and international carriage. This created additional compliance costs for market participants and hindered the integration of the shipping market. The amendment tackles this structural weakness head-on by deleting the provision that “the stipulations of Chapter Four on contracts for the carriage of goods by sea do not apply to the carriage of goods by sea between ports of the People’s Republic of China”, thereby substantially unifying the legal rules applicable to domestic and international carriage. The revision co-ordinates both domestic and international markets and resources, simplifies shipping procedures, reduces transaction costs, further unleashes the vitality of the shipping market, and supports the creation of an efficient “dual circulation” framework.

For the carriage of passengers by sea, the amended law resolves the longstanding problem of “unequal compensation for equal loss of life”. It unifies the carrier’s limitation of liability for both domestic and international carriage of passengers, eliminating differential compensation standards based on the transport scenario. This affirms legal fairness and justice, and ensures protection of passengers’ lawful rights and interests.

Rights protection

Grounded in shipping practice, the revision strikes a reasonable balance between the rights and obligations of all relevant parties, including shipowners, cargo interests, passengers and insurers. By precisely recalibrating the allocation of rights and liabilities, it establishes a fairer and more stable market order.

In the carriage of goods by sea, the revision strengthens carrier liability, refines rules on delivery of goods, clarifies that the actual shipper has the right to require the carrier to issue a transport document, and grants the shipper the right to change the port of discharge by written notice. In the carriage of passengers by sea, it substantially increases the carrier’s limits of liability for personal injury, death and property damage, makes carrier liability insurance compulsory, and allows passengers to claim directly against the insurer, constructing a comprehensive safety net for passenger travel.

Meanwhile, the revision raises the limits of maritime liability for shipowners and salvors, taking due account of the risk-bearing capacity of shipping operators. It refines the rules governing marine insurance contracts by clarifying the insurer’s duty to highlight and explain standard terms, the rules on premium refunds, and the assured’s duty of fair presentation, thereby regulating the insurance market. It establishes clear rules on the registration of property rights for the emerging ship finance leasing sector, safeguarding the lessor’s ability to enforce its claims and supporting the healthy development of the ship financing industry. The revision also brings insurance on ships under construction within the scope of the law, clarifies the legal status of mutual insurance organisations, and enhances China’s capacity to provide marine insurance services.

Digital empowerment

In the digital economic transformation, a shift towards electronic shipping documents prevails in the industry. Yet the original legislation contained no clear regulation of electronic transport documents, leaving them in doubt, and impeding the progress of digitalisation across the maritime sector.

The amendment creates a bespoke set of rules for electronic transport records, embedding their legal recognition within the chapter governing contracts of carriage of goods by sea. It confirms that an electronic transport record satisfying prescribed legal conditions shall have the same legal force as its paper-based counterpart. It also authorises carriers and shippers to agree on the issuance and conversion of electronic transport records, while imposing explicit requirements as to the authenticity, traceability and identification of those records, thereby embracing the shift towards paperless, digitalised shipping and clearing the legal hurdles that previously hampered electronic documentation.

Anti-pollution mechanism

Safeguarding the marine ecosystem is a baseline requirement for the quality-driven development of the shipping sector. Addressing the needs of marine ecological progress, the amendment adds a new chapter devoted to liability for oil pollution damage from ships, constructing a well-ordered and complete framework for compensation and prevention. This closes the institutional void left by the original legislation in marine environmental protection.

The revised law stipulates that liability for ship-source oil pollution damage shall be channelled to the owner of the vessel, and establishes a dual-protection system comprising compulsory oil pollution liability insurance and a compensation fund. It sets out detailed provisions governing liability for pollution damage caused by the carriage of oil as cargo and by bunker oil respectively. It defines the master’s statutory duties in preventing and controlling marine pollution, prohibits contractual exclusion of environmental prevention and remediation obligations between salvor and salved party, and expressly excludes losses arising from the escape of ship-source pollutants from general average.

Foreign-related rules

The revised law mandates the compulsory application of Chinese law to contracts for the international carriage of goods by sea where the port of loading or discharge is located within China. It refines the conflict-of-laws rules for foreign-related maritime relationships, including ownership and mortgages over ships under construction, possessory liens on vessels, ship collisions and general average, and introduces the principle of party autonomy. It specifies that the law of the place where the vessel is under arrest applies to possessory liens, and the law of the place where the damage occurs applies to liability for ship-source oil pollution, bringing clarity and certainty to the adjudication of foreign-related maritime disputes. Concurrently, amendments addressing limitation periods for maritime claims and the unification of international compensation standards further align the code with prevailing international practice.

Xie Ming is a partner at ETR Law Firm
Xie Ming is also a deputy director of the Maritime and Admiralty Committee at Guangzhou Lawyers Association

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Judicial recognition

While no explicit provisions define the rules for identifying corporate criminal liability under the Criminal Law and relevant judicial interpretations, the Supreme People’s Court and the Supreme People’s Procuratorate have elaborated on criteria for such identification through guidance in a series of symposium summaries, offering concrete direction for judicial practice.

The Minutes of the National Courts Symposium on the Trial of Financial Criminal Cases make clear that an offence is a corporate crime when committed in the name of the entity, and with illegal proceeds accruing to the entity. The Minutes of the Symposium on Issues Concerning the Handling of Internet Finance Criminal Cases also provide that criminal activity carried out by employees pursuant to a decision of the entity, with illicit proceeds accruing to the entity, constitute a corporate offence.

Under the Minutes of the Symposium on Issues Concerning the Handling of Environmental Pollution Criminal Cases, an environmental pollution offence constitutes a corporate crime if committed for the benefit of the entity by decision or with consent of its de facto controller, principal responsible person, or an authorised executive. It also constitutes a corporate crime where any such individual learning of an employee’s criminal act fails to intervene or adopt timely measures and instead ratifies, condones or tacitly acquiesces in the conduct.

This suggests a decision by the entity’s responsible officer or an authorised delegated executive is imputed as the corporate will.

In case law, this has been incrementally qualified. Courts look beyond the fact of authorisation, holistically examining factors to assess whether the conduct truly manifested corporate will, such as whether the decision was approved by the entity’s governing body following decision-making procedures set out in the articles of association, and whether the decision remained within the entity’s legitimate business remit.

Whether an act embodies the corporate will now stands as the boundary separating individual from entity conduct in judicial practice, constituting the pivotal contested issue in establishing corporate criminal liability. How the assessment criteria are refined and enhanced has a direct bearing on the rulings in corporate crime cases.

Compliance framework

Chinese jurisprudence on corporate crime has long focused on private companies. In these companies, governance arrangements are often underdeveloped, and ownership is commonly fused with operational control. The personal interests of the de facto controller, majority shareholder or senior management tend to overlap heavily with the company’s own interests.

This configuration means that individual decisions by these figures are readily imputed as the entity’s will, and it is realistically defensible for the judicial authorities to equate a personal decision with a corporate one.

However, when the entity concerned has a mature, modern governance framework and a robust compliance system – and the employee’s criminal conduct clearly contravenes the company’s compliance policies – how, then, should the line be drawn between individual and corporate acts?

This presents a genuine challenge in judicial practice. Experience suggests that judicial authorities scrutinise two key factors: how the compliance programme was devised and enforced; and the independence of the compliance function.

The adequacy of these two elements determines whether the compliance regime serves to exclude corporate criminal liability.

Case study

In a case concerning Nestlé employees infringing citizens’ personal information, Zheng and Yang, managers of the infant nutrition division for northwest region at Nestlé (China), and other staff, were alleged to have illicitly acquired personal data from medical personnel at several hospitals for the purpose of promoting infant milk formula.

The court held that:

(1) Nestlé nutrition specialists’ remit did not cover the acquisition of consumer personal information. The specialists’ performance was reviewed via telephone calls by the nutrition advisory centre operated by the China Association of Health Promotion and Education;

(2) Nestlé maintained an internal ban on the illicit collection of consumer personal data by employees, and at no point supplied funds to employees or healthcare professionals for this purpose; and

(3) Nestlé required every nutrition specialist to complete compliance training and sign a letter of undertaking, and all defendants in this case had undergone the prescribed training and testing.

In its final ruling, the appellate court determined: “Evidence such as Nestlé’s corporate policies and employee conduct standards proves that the company barred staff from the criminal infringement of citizens’ personal information. The appellants acted in contravention of company management rules and committed the offences to boost their individual performance. The acts are thus deemed personal in nature.”

This case illustrates that, in determining whether a compliance framework truly reflects the entity’s will, the court does not confine its review to the mere existence of compliant policies. Its scrutiny reaches further, encompassing the lawfulness of the underlying project, the extent to which the compliance system has been communicated and embedded, and the tangible results of its implementation.

Growing judicial experience is leading the courts to impose more exacting standards on compliance management systems when a company seeks to rely on them as an authentic reflection of the corporate will, such that employee violations are characterised as personal acts.

Central to this is the independence of compliance: whether the compliance department can perform its role autonomously; whether it remains free from undue interference by the entity’s leadership; and whether it can constrain the leadership’s irregular decision making.

The lesson for enterprises strengthening their compliance systems is to make independence of the compliance function, and of compliance officers, a key priority.

This involves clearly prescribing the compliance department’s responsibilities and authority, guaranteeing that compliance staff can perform their roles autonomously, and instituting effective compliance monitoring and accountability structures.

Rigorous enforcement of the compliance system will then be secured, with the entity’s criminal law risks effectively contained.

Li Kexuan is a partner at��Starrise��Law Firm

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The initial conversion price was HKD153 (USD19.5) per share, 17.6% above the closing price of the H shares on the date of the subscription agreement. Net proceeds are expected to reach around USD1.02 billion.

Fangda Partners counselled WuXi AppTec on PRC law, while Wilson Sonsini advised on international law, led by partners Chen Weiheng and Chu Yang.

Jingtian & Gongcheng served as PRC legal counsel to the underwriters Morgan Stanley, Citi and Goldman Sachs, with partner Tian Mingzi leading the team. Linklaters advised them underwriters on international law, led by partner Taiki Ki.

The issuance announcement stated that the proceeds would mainly be used for global capacity and capability development, as well as general corporate purposes.

Shanghai-headquartered WuXi AppTec was founded in 2000 and listed on the SSE and the HKEX in 2018. The company provides drug R&D and manufacturing services to the global biopharmaceutical industry, with operations across Asia, Europe and North America.

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In a joint statement, Morais Leitão said that, with its presence in Singapore and Timor‑Leste and Lupi & Associates’ base in Macau, the firm had achieved fully integrated coverage across the Asia‑Pacific region.

The partnership is aimed at providing legal support for cross‑border transactions involving China, Africa, Brazil, Portugal and Timor‑Leste. Key focus areas include: renewable energy, and oil and gas projects in Portuguese‑speaking countries and sub‑Saharan Africa; mining projects in Angola, Brazil, Mozambique and Timor‑Leste; infrastructure development across Africa; life sciences; pharmaceutical manufacturing; and immigration matters for high‑net‑worth individuals.

The lawyers at Lupi & Associates are qualified in Macau, the Chinese mainland, Brazil and Portugal. In Macau, the firm focuses on debt and equity capital markets, wealth management, private equity and funds, corporate and M&A, banking and finance, and dispute resolution, with sector expertise spanning real estate, tax and gaming.

Morais Leitão has offices in Angola, Cape Verde, Mozambique, Portugal, Singapore and Timor‑Leste. Outside Macau, Lupi & Associates has offices in Angola, Mozambique, Brazil and Portugal.

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Christina Ong, chairperson and senior partner at Allen & Gledhill based in Singapore, said: “[Wang’s] cross-jurisdictional experience will strengthen our regional capabilities, and we are confident that his addition will bring greater value to our offerings across A&G Asia.”

Wang had served as a partner in Jingtian & Gongcheng’s Shanghai office since 2021. Prior to joining Jingtian, he was a senior associate at the Shanghai office of US firm Weil. Earlier in his career, he practised at King & Wood and Gide, both in Shanghai.

With more than 15 years of experience, Wang focuses on cross‑border M&A, foreign direct investment, outbound investment, private equity, venture capital, startup financing, and general corporate and commercial matters.

In cross‑border and domestic M&A transactions, his clients span sectors including retail, energy, technology, healthcare and biotechnology. On the general corporate side, Wang has advised multinational companies on market entry into China, and the development and expansion of their China operations.

Allen & Gledhill opened its Shanghai office in 2024, with Yong Kai Chang serving as managing partner. The firm also has offices in Malaysia, Myanmar, Indonesia and Vietnam.

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The Supreme People’s Court is drafting a new judicial interpretation of the new Company Law, but significant gaps remain and debate continues. Until that takes shape, the key approaches emerging from existing case law merit close attention.

Who owns the shares?

Courts routinely hold, based on the evidential authority of the share register, that shares “cannot be returned or need not be returned” to the beneficial owner. The rationale is that such restitution would prejudice the interests of the company, fellow shareholders and creditors. As a result, judgments typically confirm the nominee as the legal owner of the shares.

The Supreme People’s Court, in article 32 of its Exposure Draft of the Interpretation on Several Issues Concerning the Application of the Company Law, provides that a beneficial owner fulfilling the formalisation criteria may be awarded the shares; otherwise, a claim for auction or sale proceeds, or for damages, may be pursued. It remains uncertain whether the draft’s final version will restore the settled judicial rule that shares belong, in principle, to the nominee.

How to split gains

A steep increase in share value is often the catalyst for conflict between beneficial owners and nominees. If ownership is vested in the nominee, a core dispute then arises: whether the beneficial owner may claim the appreciation, and how much should be awarded.

The above-mentioned draft interpretation refers this matter to the civil law rules governing the liquidation of void contracts: compensation in lieu of restitution shall be assessed by reference to the equity’s market value on the date the voidness is declared by the court, or to a value arrived at by other reasonable means.

Where a party further claims damages, the court shall, in the principle of good faith and fairness, reasonably quantify such damages with regard to the circumstances of restitution or compensation, taking into consideration the equity’s appreciation gains, depreciation losses, and transaction costs incurred in light of each party’s degree of fault and the extent of their causative contribution. Judicial practice reveals case-by-case variation in how appreciation gains are apportioned and at what ratio.

In the case of��Hu 02 Min Zhong 2446 (2021), the court stated that the distribution of investment returns shall be governed by the principles of good faith and fairness. The nominee in breach of the nominee agreement was deemed primarily responsible for the invalidity of the arrangement, given its status as a company engaged professionally in investment management.

The beneficial owner, by participating in the financial markets, was bound to observe a standard of commercial care higher than that of an ordinary person and was held secondarily liable for its fault in concluding the agreement in contravention of financial regulatory rules.

Under the general principle that “the party who invests shall reap the gains”, the beneficial owner was entitled to the principal share of the returns. The court also took into consideration that the nominee had afforded the opportunity for appreciation and borne certain investment risks. Weighing the parties’ respective degrees of fault, the degree of connection and contribution between each party’s conduct and the returns, with reference to the formula agreed in the nominee agreement, the court ultimately fixed the restitution ratio at 4:1, awarding 80% to the beneficial owner and 20% to the nominee.

In the case of��Jing Min Zhong 931 (2021), the court weighed both parties’ relative contributions to the investment returns and their transactional arrangements for apportioning investment risk, holding that the beneficial owner and the nominee should divide the returns at a ratio of 7:3. By contrast, in the case of��Min Si Zhong Zi 30 (2002), the Supreme People’s Court ruled that it would be inequitable to determine compensation purely by reference to the dividends actually received by the nominee, and fixed the nominee’s compensation payable to the beneficial owner at 40% of the sum of the shares’ market value and all dividends.

In the case��Gui 09 Min Zhong 1312 (2020), the court distinguished between: appreciation gains, which constituted fresh benefits generated after the nominee agreement had been performed, were not liable to be returned; and dividend income, which represented a loss caused by the invalidity of the nominee agreement, was therefore subject to restitution.

How to share losses

When the equity depreciates, the dispute shifts to how losses should be shared, with courts typically distributing them based on the respective faults of the parties. Referencing invalid nominee holdings in foreign-invested enterprises, the Provisions on Several Issues Concerning the Trial of Disputes Involving Foreign-Invested Enterprises (I) (2020 amendment) stipulate that the beneficial owner may either claim the equivalent value of the remaining shares or seek compensation for losses.

The court will decide whether the nominal shareholder bears liability, and in what amount, by assessing whether and to what degree that shareholder was at fault for the contract’s invalidity.

In the case of��Yue 03 Min Zhong 950 (2024), the court limited the recoverable loss to the investment amount paid under the nominee agreement and did not include loss from the deprivation of funds. Given that the nominee had acted gratuitously and should not be subjected to an excessively demanding duty of care, the court apportioned the investment loss 30% to the nominee and 70% to the beneficial owner, and ordered the nominee to return 30% of the invested capital to the beneficial owner.

Takeaways

The disposal of property following the invalidation of a nominee equity agreement engages a combined application of the principles of good faith and fairness. In practice, resolving such disputes requires close attention to the specific facts of each case. How the draft interpretation will settle the adjudicative framework is a development worth watching.

�ܴܳ���Yuru��is a��partner�����Ի����ݾ�����Xiangrong��is a���貹�������𲵲�����at Zhong Lun Law Firm��

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Chinese companies must defend their legitimate interests through legal channels, carefully assess compliance risks, and refrain from carrying out or aiding discriminatory foreign restrictions aimed at Chinese citizens or organisations.

Restrictive measures

EU restrictive measures targeting specific persons and entities fall into three main categories:

1. 1. Freezing of assets held within EU territory;
   2. Prohibition on EU nationals and companies making funds available to them, which in effect bans any transactions between sanctioned persons/entities and EU persons/entities; and
   3. Individual travel bans denying entry or transit across EU territory.

Trends

The EU’s sanctions journey against Chinese individuals and entities, as reflected in the consolidated sanctions list through to late 2025, has progressed through three stages.

Years 2017-2018.��This initial stage centred on implementing UN sanctions.

Years 2020-2021.��Driven by the EU’s values-based diplomacy, this wave of designations included:

1. 1. Tianjin Huaying Haitai Science and Technology Development and its employees, over the alleged “Cloud Hopper” cyber intrusions; and
   2. Certain officials and entities linked to Xinjiang-related matters.

Years 2024-2025.��This stage marked a turn towards geostrategic considerations, with sanctions overwhelmingly focused on Russia-related issues as geopolitical frictions increased. Designations included:

1. 1. Chinese entities and individuals channelling prohibited or restricted EU exports to Russia via third countries, such as Li Xiaocui and her companies, ARCLM International Trading and Shijiazhuang Hanqiang Technology, as well as Lin Zhongheng, who controls Shenzhen Biguang Trading;
   2. Companies offering direct or indirect material backing to Russia’s battlefield capabilities, such as China Head Aerospace Technology and its chairman, Zhou Dachuang, as well as Xiamen Limbach Aviation Engine; and
   3. Entities providing critical fiscal income to the Russian government, largely within the energy industry, such as Liaoyang Petrochemical and Shandong Yulong Petrochemical.

The EU’s approach extends beyond sanctioning the transacting companies themselves. It may also designate the individuals behind them, blocking attempts to slip away through newly incorporated shell entities. EU sanctions in these cases do not hinge on any connecting jurisdictional factor to the bloc, but are imposed purely on the strength of geopolitical priorities.

Evolving strategies

Developments of the consolidated financial sanctions list reveal three fundamental shifts in the EU’s sanctions policy towards China.

Proactive weaponisation.��The EU historically acted chiefly as an enforcer of UN sanctions, rarely initiating its own. However, escalating geopolitical frictions have led it to regularly designate entities and individuals with no jurisdictional link but conflicting political objectives or values with the EU.

Sweeping coverage.��Beyond pursuing exporters of banned or restricted EU products and entities that directly or indirectly bolster Russia’s military industrial complex, the EU now also targets importers of Russian energy. This marks a deliberate extension from military attrition to sanctions of non-EU entities lawfully participating in global commerce, with the explicit goal of draining Russia’s economic lifeblood.

Blurring compliance red lines. Many of the entities sanctioned were not arms dealers but suppliers of ordinary industrial goods such as all-terrain vehicles, machine tools and electronic components. The EU applies deliberately broad and ambiguous yardsticks for designation, covering anyone deemed to provide “material or financial support” to, or to have “otherwise benefitted” from, Russia’s military industrial complex or its decision makers. This imposes an extraordinary due diligence burden on businesses.

Countermeasures

Confronted by EU sanctions, their attendant financial and operational perils, and the requirements of China’s Anti-Foreign Sanctions Law, Chinese businesses going global must act decisively to reconcile growth ambitions with compliance realities.

Erecting robust firewalls.��All dealings linked to Europe, along with sensitive business lines, require strict legal, financial and personnel isolation, so that sanctions risk does not cascade across the group.

Exercising prudence in contract drafting.��Steer clear of clauses that directly reference foreign sanctions, for instance, by citing compliance with EU sanctions as grounds for termination.

If a withdrawal clause is necessary, it should be founded on genuine commercial risks separate from foreign sanctions pressure – such as payment system disruption and substantial logistical blockages – and framed through neutral legal terms like “change of circumstances” or “frustration of performance” as an emergency legal safeguard.

Full adherence to Chinese legislation, including the Anti-Foreign Sanctions Law and the Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures, is essential.

Implementing comprehensive due diligence and compliance protocols. Businesses should adopt a risk-based customer screening system, perform enhanced due diligence on transactions linked to high-risk jurisdictions, execute robust compliance clauses, and maintain meticulous documentation of compliance processes.

Cheng Wenli is a partner,��and Liu Yaqi is a��trainee lawyerparalegal��at��Shanghai��Ronly &��Tenwen��Partners��

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