In April 2026, the State Council of China consecutively issued the Regulations of the State Council on Industrial and Supply Chain Security (the“Industrial and Supply Chain Security Regulations”) and the Regulations of the People’s Republic of China on Countering Unjustified Extraterritorial Jurisdiction (the“Countering Extraterritorial Jurisdiction Regulations”).

Shortly afterward, on May 2, China’s Ministry of Commerce (“MOFCOM”) issued, under the Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures(the “Counteracting Rules”), the first formal blocking order targeting U.S. measures. The recent wave of legislation and enforcement has not only sparked market debate but also spotlighted the evolving structure and priorities of China’s countermeasure legal framework. For businesses, navigating this framework has become a key aspect of cross-border compliance.

Drawing on the two April regulations, this article examines the system, outlines essential considerations for enterprises, and provides practical guidance.

I. The Evolution of China’s Countermeasure Legal Framework

China’s regulatory initiatives in April-May 2026 are part of a long-term, systematic effort to develop and implement its countermeasure legal framework, rather than isolated or reactive measures. As international trade and geopolitical dynamics evolve, this legal toolkit is expected to continue expanding.

Since the 2021 Work Report of the NPC Standing Committee first highlighted the need to strengthen foreign-related legislation and the legal toolkit for countering sanctions, interference, and extraterritorial jurisdiction, building China’s countermeasure system has become a core component of foreign-related legislation and national security strategy, and also a priority reinforced in the 15th Five-Year Plan.

Over recent years, China has established a multi-layered framework of national laws, administrative regulations, and departmental rules, centered on the Anti-Foreign Sanctions Law (the “AFSL”) and its implementing regulations, supported by the Provisions on the List of Unreliable Entities and the Counteracting Rules, and extended through the Foreign Trade Law, Export Control Law, and other related regulations.

These instruments are increasingly applied in enforcement and judicial proceedings. More than 200 foreign entities have been designated to blacklists, and Chinese courts have used the AFSL to facilitate settlements, issue enforcement orders, and support domestic compensation claims, protecting Chinese businesses from unjustified extraterritorial measures.

The two regulations issued in April 2026 address different issues: one focuses on protecting the security of China’s industrial and supply chains, while the other targets the improper extraterritorial application of foreign laws within China. Together, they further enrich China’s countermeasure toolkit.

II. Countering Extraterritorial Jurisdiction Regulations: Key Takeaways

The extraterritorial application of foreign laws has increasingly constrained Chinese businesses, disrupted key industries, and posed risks to broader national economic and strategic interests. Secondary sanctions, expanded export controls, and other long-arm measures now frequently target Chinese firms even when there is little or no legitimate connection to the foreign jurisdiction, creating operational, financial, and compliance challenges.

Against this backdrop, the Countering Extraterritorial Jurisdiction Regulations further strengthen China’s countermeasure legal framework against sanctions, interference, and extraterritorial measures.

1. Core Mechanism

The Countering Extraterritorial Jurisdiction Regulations establish a mechanism under which Legal Department of the State Council, in coordination with other relevant authorities, identifies foreign measures that constitute improper extraterritorial jurisdiction.

Article 6 specifies that the assessment considers: (1) whether the measures violate international law or fundamental principles of international relations; (2) whether the extraterritorial application of the foreign jurisdiction is appropriately connected to that country; and (3) whether the measures harm China’s national sovereignty, security, or development interests, or infringe upon the legitimate rights and interests of Chinese citizens or organizations.

This identification mechanism is a central feature and highlight of the Regulations, effectively complementing both the Counteracting Rules and the AFSL:

• Link to the Counteracting Rules: Under the Counteracting Rules, the Ministry of Commerce identifies improper extraterritorial application of foreign laws only when a Chinese entity is prohibited or restricted from conducting normal trade or related activities with a third-country entity. A typical example is U.S. secondary sanctions. In contrast, the Countering Extraterritorial Jurisdiction Regulations cover a broader range of measures. Any foreign action that violates international law or fundamental principles of international relations, and that harms China’s sovereignty, security, development interests, or the legitimate rights of Chinese citizens or organizations, may be recognized as an improper extraterritorial measure, regardless of whether it restricts trade with third countries.
• Relationship with the AFSL: The Regulations’ “improper extraterritorial measures” partially overlap with the AFSL’s “discriminatory restrictive measures,” but their scopes differ. The AFSL targets foreign actions that suppress or discriminate against China, often involving interference in internal affairs, and extends to acts threatening China’s sovereignty, security, or development interests. By contrast, the Regulations provide more specific criteria, notably assessing whether the foreign jurisdiction has a legitimate connection to the targeted conduct.
• The enactment of the Countering Extraterritorial Jurisdiction Regulations confirms that both foreign laws and measures that explicitly discriminate against China, as well as those that do not target China but harm its sovereignty, security, or development interests or infringe on the legitimate rights of Chinese citizens and organizations, may now be subject to countermeasures under China’s legal framework.

2. Key Measures Targeting Improper Extraterritorial Jurisdiction

（A）Publication of Improper Extraterritorial Measures

Once a foreign measure is identified as improper, the State Council may issue a public notice prohibiting any individual or entity from executing or assisting in its enforcement. Such publication serves as a general recognition mechanism, though its application requires careful consideration of diplomatic relations, industrial stability, financial markets, and trade. Given the multiple factors involved, the measure may be applied with prudence.

It should be noted that public disclosure is not mandatory; even without a formal announcement, authorities may notify relevant entities on a case-by-case basis.

（B）Injunctions

Article 13 authorizes the State Council to issue injunctions prohibiting organizations or individuals from implementing or assisting in the implementation of improper foreign measures. Such injunctions can be issued on a case-by-case basis, without prior public notice, allowing flexibility in addressing specific cross-border transactions.

The practical operation of injunctions remains to be clarified. They may function similarly to court injunctions, directly preventing the domestic enforcement of improper extraterritorial measures. It is not yet clear whether their issuance will require a request from the affected entity, such as when foreign counterparties enforce sanctions against a Chinese firm, or whether confirmed measures and orders will be publicly disclosed for reference by other entities. These aspects are expected to evolve through practice.

（C）Malicious Entity List

The Regulations introduce a new tool— “the Malicious Entity List”, targeting foreign organizations or individuals that promote, assist, or implement improper extraterritorial measures. Measures against listed entities may include visa denial, restricted entry or residence, asset freezes, transaction and data restrictions, investment prohibitions, import/export limitations, fines, and other necessary actions. The list can also apply to entities controlled by or affiliated with listed parties.

Unlike the Unreliable Entity List, which addresses harmful actions in the trade and economic sphere, or the countermeasure list under the AFSL, the Malicious Entity List specifically focuses on improper extraterritorial jurisdiction. This enhances the precision and effectiveness of countermeasures. Listed entities may face targeted restrictions on visas, entry, employment, transactions, investments, and assets within China, complementing measures under the AFSL and strengthening enforcement against blacklisted parties.

（D）Other Countermeasures

In addition to the above, the Regulations provide further countermeasures targeting different actors. Foreign states implementing improper extraterritorial measures may be subject to restrictions on diplomacy, entry and exit, trade, investment, international cooperation, and foreign aid. Organizations or individuals suspected of executing or assisting such measures may face on-site inspections and document review or copying. Beyond blocking orders, authorities may also conduct interviews and require corrective actions.

3. Legal Consequences

Violations of the Regulations may incur civil, administrative, and criminal liabilities. Civilly, affected parties can sue for cessation and damages. Besides, Administrative authorities may impose corrective orders; restrict participation in government procurement, trade, or cross-border data transfers; limit entry, exit, or residence; and levy fines. Where violations constitute a crime, criminal prosecution may follow.

III.  Industrial and Supply Chain Security Regulations: Key Takeaways

Amid rising geopolitical tensions and frequent trade restrictions, industrial and supply chain security has become a strategic concern in China. Recent disruptions, including semiconductor export controls, technology restrictions, and energy or logistics shocks. underscore the risks of fragile supply chains.

The new Industrial and Supply Chain Security Regulations integrate supply chain security into the national security framework, aiming to strengthen stability, resilience, and strategic autonomy through coordinated government oversight.

1. Article 13: Supply Chain Investigations

Article 13 of the Industrial and Supply Chain Security Regulations, which governs supply chain investigations, has drawn significant attention.

It provides that any organization or individual conducting supply chain-related information collection in China in violation of laws, regulations, or relevant rules may face enforcement measures.Understanding the scope and boundaries of this provision is critical for companies to manage supply chain compliance effectively.

（A）Background and Rationale

The measure addresses the growing prevalence of foreign supply chain investigations. In recent years, laws such as the U.S. Uyghur Forced Labor Prevention Act, ICTS supply chain regulations, EO 14117 final rules, and EU initiatives on batteries, critical raw materials, and corporate sustainability due diligence have required Chinese companies to provide detailed upstream and supplier-level information. These investigations often cover labor, environmental compliance, and government subsidies, creating heavy compliance burdens and increasing the risk of sensitive data exposure.

Against this backdrop, Article 13 of China’s Industrial and Supply Chain Security Regulations specifically governs domestic supply chain investigations and information collection, with the core objective of preventing unauthorized disclosure and safeguarding the security of industrial and supply chain data.

（B）Scope of Article 13

Article 13 applies to all organizations and individuals conducting supply chain-related activities within China, whether domestic or foreign. It covers on-site interviews, direct data collection using technical tools, and information gathering via questionnaires, audits, or due diligence.

The provision targets activities that violate Chinese laws, regulations, or departmental rules. Collecting supply chain data for foreign regulatory or compliance purposes should therefore be carefully assessed for potential risks under Article 13.

（C）Scope of “Violation of Chinese Laws and Regulations” under Article 13

Enforcement of Article 13 relies on other existing Chinese laws and regulations as the legal basis to determine whether supply chain-related information collection violates the Industrial and Supply Chain Security Regulations. Companies should remain aware of all relevant laws that may apply to their activities, including any future rules or guidance are issued under Article 13.

Relevant legislation includes, but is not limited to, the AFSL, Data Security Law, Counter-Espionage Law, State Secrets Law, Surveying and Mapping Law, Measures for Foreign-Related Investigations, Data Export Security Assessment Measures, and Human Genetic Resources Regulations.

Common activities, such as on-site supplier interviews, surveys, and questionnaires, or technical data collection by domestic or foreign entities, may fall within Article 13 if they gather information in violation of Chinese laws or regulations. Special attention is required when handling important data, which triggers additional obligations under Chinese data laws, including registration with regulators, periodic risk assessments, and pre-transfer security evaluations. In practice, companies must carefully evaluate whether their information collection involves important data and ensure full compliance with all applicable laws before engaging in supply chain investigations.

（D）Practical Implications of Article 13

The implementation of Article 13 is expected to have a broad impact on corporate operations across the entire supply chain. Common supply chain management activities such as traceability checks, end-user and end-use verification, and supplier compliance audits will need to be reassessed for legal risks and compliance boundaries.

Any entity collecting supply chain information in China may fall under regulatory oversight, including manufacturing firms, market research and compliance service providers, due diligence advisors, financial information providers, consultancy platforms, and supply chain analytics companies. Activities like data aggregation, on-site interviews, and surveys conducted domestically should be closely monitored.

（E）Recommendations for Companies

• Assess scope and sensitivity: Map supply chain operations, identify strategic or high-risk sectors, and handle all collected data with strict confidentiality. Exercise particular caution for data collected for foreign compliance, partner requests, or politically sensitive topics, and determine if it qualifies as important data under Chinese law.
• Strengthen compliance and governance: Monitor regulatory updates, apply full-process controls, store and classify data locally, and obtain prior approval for cross-border transfers. Conduct audits to ensure ongoing compliance.
• Manage cross-border requests cautiously: Do not share original supply chain or core technical data with foreign authorities without Chinese approval, per Article 36 of the Data Security Law. Assess legal and compliance risks before any disclosure.

2. Other Key Provisions in the Industrial and Supply Chain Security Regulations

（A）Protection of Key Sector Supply Chains

In response to recent supply disruptions from foreign export controls, sanctions, and compliance requirements, Articles 7-11 require the State Council to maintain a dynamic list of key sectors, ensuring stable production and flow of materials, technology, and products. Mechanisms for information sharing, risk monitoring, and emergency management are also promoted to strengthen resilience. Sectors such as semiconductors, new energy, and rare earths are likely candidates, with companies potentially receiving coordinated government support during supply chain disruptions.

（B）Linking to the AFSL: Strengthening Countermeasure Mechanisms

Articles 14 and 15 establish countermeasure mechanisms for foreign states, regions, international organizations, and foreign entities or individuals, closely linked to the AFSL.

Article 14 allows authorities to investigate and impose countermeasures such as trade restrictions, special fees, or inclusion on a countermeasure list, if foreign states, regions, or international organizations implement discriminatory or restrictive measures that threaten China’s supply chain security. Article 15 targets foreign entities or individuals that disrupt normal trade, apply discriminatory restrictions, or cause actual or potential harm to China’s supply chain. Measures may include interviews, document review, and restrictions on trade, investment, transactions, entry, or residence, and can extend to affiliated or controlled organizations.

Together, these provisions operationalize “discriminatory restriction measures” under the AFSL in the supply chain context, emphasizing that foreign companies should carefully assess supply chain decisions, especially those influenced by foreign laws, to avoid triggering countermeasures.

IV. Reassessing Compliance in China’s Evolving Legal Landscape

China’s countermeasure framework and legal tools are designed to clarify domestic compliance obligations rather than create conflicts with foreign laws. The evolving regulatory landscape reflects a shift toward a multi-jurisdictional environment, requiring multinational and foreign-invested companies, as well as Chinese firms engaged in global supply chains, to navigate obligations and risks across China, the U.S., the EU, and other jurisdictions.

1. Navigating Foreign Legal Requirements

Companies operating in China may continue to consider foreign laws and regulations, including sanctions and export controls, as part of their compliance programs. However, activities must not violate Chinese law or infringe on the rights of domestic entities. Companies should particularly evaluate:

• Whether an activity is prohibited or restricted under Chinese law;
• Whether it constitutes a discriminatory restriction against Chinese parties;
• Whether it involves executing improper foreign extraterritorial measures.

Routine compliance practices that rely solely on foreign rules may require reassessment to avoid conflicts under Chinese regulations.

2. Adjusting Business Relationships

Corporate decisions regarding partnerships and transactions in China remain under the discretion of the enterprise but must comply with domestic laws. Any adjustments should be evaluated for potential legal or operational implications, including regulatory investigations, civil liability, or reputational impact. Practical considerations include:

• Distinguishing legal requirements from business preferences;
• Separating corporate policies from local legal obligations;
• Differentiating direct from indirect exposure;
• Exploring permissible alternatives, exemptions, or licensing options.

3. Toward a Balanced Compliance Framework

In the current environment, companies increasingly need compliance frameworks that are both more balanced across jurisdictions and more tailored in practice.

Companies should move beyond compliance models focused primarily on U.S. and EU legal risks and adopt more integrated cross-border compliance systems capable of managing overlapping sanctions, export control, supply chain, data, technology, and industrial policy risks across multiple jurisdictions.

At the same time, many of the legal conflicts currently faced by multinational companies stem from relatively mechanical or “one-size-fits-all” approaches to implementing foreign sanctions or export controls. For example, automatically terminating transactions solely because a counterparty appears on a foreign restricted party list may significantly increase exposure under China’s countermeasures and anti-extraterritoriality framework.

In our view, managing competing legal obligations increasingly requires more flexible, risk-based, and fact-specific compliance decision-making, rather than simplified or purely “label-based” approaches.