China Issues New Regulations Countering Foreign States’ Extraterritorial Restrictive Measures

On April 13, 2026, China’s State Council issued the Regulation of the People’s Republic of China on Countering Foreign States’ Unlawful Extraterritorial Jurisdiction (State Council Decree No. 835, the “Regulation”), effective immediately. The Regulation is the first State Council-level administrative regulation to address foreign extraterritorial measures against Chinese entities or persons (“Extraterritorial Measures”) and operationalize China’s framework for identifying and countering what China characterizes as improper Extraterritorial Measures against China. (See our prior client alerts on enforcement of China’s Anti-Foreign Sanctions Law, Enforcement of China’s Anti-Foreign Sanctions Law Strengthens Through Private Cause of Action and New Implementing Rules | Morrison Foerster; and understanding of China’s Anti-Foreign Sanctions Law, China’s New Anti-Foreign Sanctions Law: Understanding Its Scope and Potential Liabilities | Morrison Foerster.)

The Regulation moves China’s anti-“long-arm jurisdiction” regime from a previously fragmented set of tools toward a more coordinated enforcement framework. It not only reiterates that no organization or individual may implement foreign Extraterritorial Measures identified by China as improper, but also introduces a broader set of mechanisms, including a “Malicious Entity List,” execution orders to block foreign Extraterritorial Measures, investigative powers, civil remedies, administrative penalties, and a potential path to criminal liability.

I. Positioning the Regulation in China’s Legal Framework

The Regulation should be viewed as part of a broader evolution in China’s anti-foreign sanctions framework designed to protect what China views as its national interests. Historically, many of China’s relevant tools—including the 2021 Blocking Rules and the 2020 Unreliable Entity List regime—were housed in MOFCOM (Ministry of Commerce)-led departmental rules or administrative mechanisms. By contrast, the latest Regulation is a State Council-level administrative regulation with a higher authority, which strengthens the basis for inter-agency coordination.

The Regulation also functions as an important implementing instrument for the 2021 Anti-Foreign Sanctions Law (“AFSL”). The AFSL established the statutory basis for reciprocal countermeasures such as asset freezes and visa restrictions in response to foreign sanctions against Chinese entities. Although Chinese authorities had already begun to operationalize this toolkit through earlier measures—including MOFCOM’s 2021 Blocking Rules and the State Council’s March 2025 implementing provisions under the AFSL—the latest Regulation provides more procedural details, translating that high-level authority into a more operational regulatory regime.

The Regulation should also be viewed alongside adjacent regulatory developments, including the State Council’s recent supply-chain security rules, the Regulation on Industrial, Supply-Chain Security (State Council Decree No. 834, the “Supply-Chain Regulation”), issued on March 31, 2026, that took effect immediately. The Supply-Chain Regulation aims to respond to various countries’ recent industrial and supply-chain security measures. The Supply-Chain Regulation authorizes the regulators to maintain “key sector” lists to conduct risk monitoring, reserve supply-chain capacities, and better respond to urgent disruptions to economic stability or national security. For multinational corporations (“MNCs”) operating in China and their business partners, the more consequential point is that the Supply-Chain Regulation authorizes regulatory investigations into discriminatory measures on Chinese persons in a manner that harms China’s industrial and supply-chain security. Countermeasures authorized under the Supply-China Regulation are similar to those under the latest Counter Foreign Extraterritorial Measures Regulation. This matters because an MNC’s sanctions, export control, or derisking decision may now face exposure not only under the traditional AFSL/Unverified Entity List (“UEL”) architecture, but also under a parallel industrial and supply-chain security regime and an anti-foreign extraterritorial jurisdiction regime.

So far, the Regulation only applies to Mainland China, that is, it doesn’t apply to the Hong Kong or Macau SARs. This suggests that the Regulation would not directly govern foreign sanctions or other restrictive measures taken solely against Hong Kong or Macau persons. That said, where a sanctions-related decision involving Hong Kong or Macau has effects in Mainland China (e.g., Mainland affiliate, personnel, or assets), Chinese authorities may still view the matter as implicating PRC national interests.

II. Principal Features and Key Provisions

At a high level, the Regulation establishes four interlocking components.

• First, it creates an identification mechanism for the Ministry of Justice (“MOJ”) to identify foreign Extraterritorial Measures. Factors affecting the identification decisions include international laws and principles; whether the foreign Extraterritorial Measures properly address the underlying conduct that gave rise to such foreign measures; impact on China’s national interests; lawful rights of Chinese persons; and other factors. These are high-level standards that leave broad discretion to MOJ to determine whether a foreign measure is “improper,” with limited visibility into how those factors are assessed.
• Second, the Regulation establishes a prohibition-and-exemption framework. Once a foreign Extraterritorial Measure is identified, no one may implement that measure. Meanwhile, parties affected by the Regulation’s prohibitions may apply to comply with Extraterritorial Measures in special circumstances. This feature is particularly relevant for MNCs facing competing legal obligations in multiple jurisdictions. MOJ can also issue a Prohibition Execution Order against a specific organization or individual implementing foreign Extraterritorial Measures. Non-compliance to such an order may result in penalties, including restricting participation in government procurement; restricting import and export of goods, technologies, and services; restricting the receipt or provision of cross‑border data with foreign parties; restricting exit from or entry to China, or residence in China; and imposing monetary fines. Because these measures may be imposed on both organizations and individuals, executives of implicated organizations could also face direct exposure where they are found to have facilitated the prohibited measures.
• Third, the Regulation introduces both state-level countermeasures and entity-specific measures. Chinese authorities may take counteractions that affect diplomacy, trade, investment, and cross-border exchanges. At the entity level, the Regulation authorizes a “Malicious Entity List” for foreign entities/persons that “promote or participate in” the implementation of Extraterritorial Measures, including, for example, lobbyists or think tanks that promoted the Extraterritorial Measures. Inclusion on the Malicious Entity List may result in a broad range of countermeasures, including entry bans or deportation, restrictions on work or residence in China, seizure or freezing of assets within China, prohibitions on data transfers or commercial dealings with Chinese parties, restrictions on trade activities, investment bans, and monetary fines.
• Fourth, the Regulation establishes a more developed enforcement-and-remedies framework. Chinese parties harmed by Extraterritorial Measures may file civil suits against the organizations or individuals that implemented such measures and may seek cessation of the infringing conduct as well as compensation for losses in Chinese courts. Separately, Chinese regulators may investigate suspected violations through on-site inspections and may order rectification or similar orders. While the Regulation does not itself set out a standalone criminal offense, it makes clear that where the conduct constitutes a crime under applicable PRC law, criminal liability may be pursued. Accordingly, the Regulation contemplates a layered enforcement model under which companies and individuals may face concurrent civil, administrative, and potentially criminal exposure.

III. Practical Implications for Multinational Companies

• MNCs with material operations in China should consider identifying categories of foreign‑law-driven decisions that may affect China-facing business, particularly those involving foreign sanctions, export controls, or other restrictions (e.g., supply chain limits, payment holds, customer offboarding, or cross-border data transfers). They should also assess how globally standardized sanctions or export control programs are being applied into their China operations.
• MNCs’ decisions made by headquarters that negatively affect China-facing business—such as halting transactions, restricting supply, blocking payments, or transferring data in response to foreign sanctions, export controls, court orders, or subpoenas—may now be examined in China not only as commercial decisions, but also as potential implementation of foreign extraterritorial measures.
• MNCs should consider establishing robust internal escalating channels to identify and elevate potential violations of the Regulation or other related laws (e.g., the AFSL). These channels may include clear decision-making authority for China-related sanctions or export control issues, and escalation triggers for matters involving customer exits, supply suspensions, payment blocks, or data-transfer restrictions.
• The Regulation also raises operational risk because Chinese authorities are expressly empowered to intervene at the investigative stage, including to conduct dawn raids, obtain records, and take preliminary corrective actions. In practice, this means that internal compliance processes themselves may become the subject of scrutiny, and materials such as internal escalation records, payment-blocking instructions, and decision memoranda may be subject to review in a regulatory investigation. MNCs therefore should consider reviewing their corporate governance structures for China-related sanctions and export‑control decision-making, refreshing crisis-management and dawn-raid response plans, updating internal investigation and document-preservation protocols, and providing trainings to relevant legal, compliance, IT, and business personnel on how to respond to regulatory inquiries.

As further explained in the Terms / Notices linked below, the information provided herein is not legal advice. Any information concerning the People’s Republic of China (PRC) is not an opinion on, determination on, or certification of the application of PRC law. We are not licensed to practice PRC law.