On 23 March 2025, the State Council issued the Regulations on the Implementation of the Anti-Foreign Sanctions Law, marking a shift in the country’s counter-sanctions legal framework from broad principles to detailed operational rules.
The regulations, comprising 22 specific provisions, address ambiguities in the 2021 Anti-Foreign Sanctions Law (AFSL) by enhancing the enforceability of countermeasures, improving inter-agency co-ordination, and clarifying corporate compliance obligations. This refinement responds to escalating China-US trade tensions and tightening technology restrictions, with the core approach defined as “targeted countermeasures, dynamic adjustments and bilateral accountability”.
Breakthrough and impact
Associate
W&H Law Firm
Tel: +86 134 2647 4313
Email: wuhaox@weihenglaw.com
The regulations introduce key innovations across four critical areas, each carrying direct implications for corporate operations.
Enforcement escalations. Asset freeze provisions now cover all asset classes, explicitly including cash, securities, equity holdings, intellectual property and accounts receivable, closing previous loopholes that allowed sanctioned entities to shield assets through transfers. This could paralyse operations of subsidiaries of sanctioned entities in China if core IP assets are frozen, triggering severe supply chain disruptions.
The regulations also introduce China’s first formalised industry restriction list, banning transactions across nine specified sectors including education, technology, legal services, environmental protection and data. The new prohibition on providing data and personal information particularly targets compliance vulnerabilities of Western tech firms.
Reciprocal compliance obligations. Domestic entities failing to implement countermeasures face severe penalties including exclusion from government procurement, import-export operations and cross-border data transfers, alongside potential travel restrictions for executives. Export-oriented businesses must now implement robust counterparty screening mechanisms incorporating both primary and secondary sanctions checks as baseline compliance measures to avoid blacklisting.
Foreign entities enforcing extraterritorial sanctions against Chinese parties also face legal liability. Companies complying with foreign sanctions – such as supply chain cutoffs – may be subject to administrative censure and civil lawsuits for damages in Chinese courts. A landmark 2025 settlement of RMB84 million (USD11.7 million) mediated by the Nanjing Maritime Court demonstrates this enforcement capability.
Shift from rigid sanctions to flexible engagement. Sanctioned entities retain avenues for remediation. Companies should conduct a thorough analysis of section 337 investigation procedures with legal counsel, potentially securing suspension or revocation of countermeasures through corrective actions or mitigation of consequences – an approach mirrored in successful US cases involving intellectual property unfreezing.
The framework also incorporates discretionary exemptions. Domestic firms requiring transactions with sanctioned parties under exceptional circumstances – such as diplomatic necessities or critical civilian supply chains – may petition regulators for waivers. This calibrated approach acknowledges the complex realities of China-US relations, preserving vital commercial channels while avoiding disproportionate collateral damage.
Countermeasures to extraterritorial jurisdiction. The regulations bring the enforcement of foreign sanction-related judgments within their scope. This means foreign court rulings – such as US orders freezing Chinese corporate assets – may now directly trigger China’s countermeasures.
This development forces multinational corporations to fundamentally reassess their China-related litigation strategies to avoid becoming caught in cross-jurisdictional legal disputes. Companies must urgently restructure their compliance frameworks by implementing dual screening systems. These should simultaneously verify whether business partners appear on China’s sanctions lists while examining whether their own operations involve prohibited sectors, particularly sensitive areas such as data exports to sanctioned entities.
Technological solutions are recommended, such as smart contract protocols embedded in compliance databases to provide real-time transaction blocking capabilities.
Responsive strategies
Businesses must enhance their resilience through diversified supply chain networks and multi-currency settlement systems. Drawing lessons from Russia’s inclusion of 48 countries and regions on its “unfriendly nations” list, companies should develop systematic contingency plans incorporating renminbi payment channels, alternative logistics hubs and domestic technology substitutes. A notable case saw a Chinese enterprise successfully recover payment through court-mediated arbitration after sanctions voided its shipbuilding contract, demonstrating the effectiveness of such safeguards.
Affected companies may mitigate losses by leveraging the regulations’ dynamic adjustment mechanism. By voluntarily submitting compliance remediation reports and independent third-party assessments, businesses can apply for exemptions or reduced sanction durations.
Legislation outlook
China’s counter-sanctions framework is evolving from a defensive posture to a rules-based counteroffensive strategy. The regulations creatively blend elements of the EU’s 1996 Blocking Statute and Russia’s 2018 Counter-Sanctions Law while introducing distinctive Chinese features including exemption application procedures and judicial remedies, and embodying a unique “targeted response plus inclusive governance” approach.
The global competition for rule making in emerging sectors is intensifying. China’s counter-sanctions legislation represents a strategic push for greater influence in digital trade and AI governance frameworks, with businesses now facing interconnected risks between data export restrictions and technology co-operation blacklists.
In conclusion, establishing international best practice management systems and maintaining compliance operations constitute genuine competitive advantages. The introduction of the regulations represents more than just an enhancement to Chinese companies’ overseas legal toolkits – it signals the emergence of rules-based confrontation as the new normal in great power competition.
Businesses must now transcend conventional compliance frameworks, treating sanctions resilience as a critical component of supply chain durability and market access, while continuously recalibrating the balance between risk exposure and commercial interests in this evolving landscape.
Wu Hao is an associate at W&H Law Firm. He can be contacted by phone at + 86 134 2647 4313 and by mail at wuhaox@weihenglaw.com
