On 7 and 13 April 2026, China’s State Council enacted the Regulation on the Security of Industrial and Supply Chains (Decree 834) and the Regulation on Combating Improper Extraterritorial Jurisdiction of Foreign States (Decree 835). As early as 15 May 2026, China’s Ministry of Justice invoked Decree 835 for the first time: the EU Commission’s state aid investigations against a Chinese manufacturer of airport scanners were classified as an “improper extraterritorial jurisdictional measure.” The two regulations are central components of a steadily expanding countermeasures regime and increase the risks of conflicts of obligations between Chinese law and compliance requirements of other jurisdictions for multinational companies.
Background and Overview
Since 2021, China has been continuously expanding its countermeasures regime – from MOFCOM’s Blocking Rules (January 2021) to the Anti-Foreign Sanctions Law (AFSL, June 2021), the revised Anti-Espionage Law (2023), and Decree 803 on the Implementation of the AFSL (March 2025). The 15th Five-Year Plan of March 2026 reaffirmed this development as a priority.
The countermeasures regime is no longer merely theoretical – it is being actively applied: more than 200 foreign companies are on China’s sanctions lists. Chinese courts have already applied the AFSL to enforce damages claims arising from compliance with foreign sanctions. Under Article 12 AFSL, a Chinese company placed on the US SDN List reached a settlement of approx. USD 12 million before Nanjing Maritime Court (November 2024) against a Swiss contractual partner that had withheld payment citing US sanctions obligations. The Supreme People’s Court classified the decision in March 2026 as a landmark decision for future tort law proceedings.
Decrees 834 and 835 not only address foreign governmental measures but also impose stricter liability on Chinese companies and their executives for assisting foreign parent companies or business partners in implementing extraterritorial regulations. For companies doing business in or with China, this significantly exacerbates the already existing conflict of laws.
Key Content of Decree 834
Decree 834 establishes a comprehensive administrative structure to mitigate dependencies in key technology areas, including a cross-departmental working mechanism, key sector lists, a supply chain risk monitoring and early warning system, and an emergency response management system.
Furthermore, Decree 834 authorizes State Council departments to conduct investigations and adopt countermeasures – including trade and investment restrictions, entry bans, and placement on the sanctions list – against foreign actors that harm Chinese supply chains. All organizations and individuals within Chinese territory are obligated to comply with these countermeasures; violations carry significant administrative sanctions – including exclusion from government procurement, import and export restrictions, and restrictions on data transfers and leaving the country. In this regard, MOFCOM issued implementing rules on 22 June 2026 (Announcement No. 24-2026), clarifying its competence for investigating supply chain-damaging measures as well as imposing the countermeasures and administrative sanctions provided for in Decree 834.
The third set of provisions concerns information security. It includes requirements for companies and research institutions to enhance their supply chain-related risk management systems, reporting mechanisms for companies and industry associations regarding matters affecting supply chain security, and the much-discussed Article 13, which expressly addresses supply chain-related information collection in China for the first time.
Article 13 in particular raises the question of whether the collection of supply chain data as such is unlawful under Chinese law. The provision is to be understood as a referring provision: information collection is only unlawful if it violates other applicable provisions of Chinese law. Nonetheless, the provision sends a clear signal – anyone collecting data in China to comply with foreign legal requirements should expect increased scrutiny by the authorities.
Key Content of Decree 835
Decree 835 authorizes the Ministry of Justice to identify improper extraterritorial jurisdictional measures of foreign states. The decisive criteria include violations of international law, impairment of Chinese sovereignty and security interests, and the absence of a sufficient link between the regulated conduct and the state asserting extraterritorial authority.
This regulation thus marks a significant expansion beyond the 2021 Blocking Rules, which target foreign measures restricting Chinese parties' economic activities with third countries (i.e. primarily US secondary sanctions).
The decree equips the Ministry of Justice with two instruments: the public announcement of an improper measure and the issuance of a blocking order. This is supplemented by the “Malicious Entity List" for foreign parties involved in such measures. The consequences range from entry and transaction bans to asset freezes and fines.
Violations of Decree 835 may result in civil remedies (injunctive relief and damages claims), administrative penalties (exclusion from government procurement, import and export restrictions, fines), and, potentially, criminal liability – particularly under the criminal offenses of espionage and unlawful disclosure of state secrets and intelligence information to foreign countries.
Relevance for Compliance Practice of Multinational Companies
Both decrees entered into force upon their respective promulgation in April 2026. Companies operating across borders must accordingly already factor potential conflicts with Chinese law into their assessments when navigating US and EU sanctions, extraterritorial investigations, or other compliance requirements with extraterritorial reach.
If, for example, a company intends to terminate a business relationship with a Chinese supplier or suspend a transaction with a Chinese business partner due to a US sanctions measure or a European due diligence obligation – such as under the CSDDD –, it must consider the following in its risk assessment:
- Such a measure could be classified by the Chinese authorities as the execution or support of an “improper extraterritorial jurisdictional measure” or as a discriminatory termination of normal business relations. The disruption of “normal business” and the associated endangerment of supply chain security are now listed in MOFCOM Announcement No. 24-2026 as one of the two subjects of investigation.
- Should this be the case, the company would risk not only injunctive relief and damages claims brought by the Chinese business partners in Chinese courts, but also severe governmental countermeasures – such as transaction bans for foreign counterparties and the companies they control in China, entry bans for employees seconded to China, or revocation of residence permits of non-Chinese nationals working in China.
Companies can still structure business relationships based on commercial, strategic, or other compliance considerations. The key challenge is to document and justify these decisions in a manner that prevents them from being construed under Chinese law as implementing foreign sanctions or as discriminatory measures.
Supply chain-related information collection – due diligence, supplier audits, on-site investigations – is not prohibited per se in China. Specific compliance obligations – notably the mandatory security assessment by the authorities – are only triggered when personal data or so-called “important data” are transferred cross-border. There are also numerous sector-specific restrictions on data transfers, for example in the field of geographic information. Outside these regulated data categories, routine supply chain compliance measures remain generally manageable.
Particular risks arise when the information collection is required by the authorities. Cross-border data disclosure to foreign judicial and law enforcement authorities are permissible only with prior regulatory approval under Chinese law. It remains unclear whether indirect data disclosure is also covered – for instance, when a Chinese supplier provides comprehensive traceability documents that its business partner forwards to the US Customs and Border Protection (CBP) to prevent seizures under the Uyghur Forced Labor Prevention Act. The same question arises when a European importer, in response to an official (preliminary) investigation under the EU Forced Labour Regulation, requests information from Chinese suppliers regarding the measures they have taken to prevent forced labor.
Conclusion
Decrees 834 and 835 significantly expand China’s legal toolkit for countering foreign measures. The decrees do not prohibit routine supply chain compliance measures outright. They do, however, create a framework under which – once countermeasures or blocking orders are imposed – immediate and binding obligations arise for all relevant entities and individuals operating within Chinese territory.
Companies with links to China should promptly assess whether their existing compliance processes can withstand the new conflict landscape. This concerns in particular:
- the review of global sanctions and export control policies for compatibility with Chinese law and, where necessary, their local adaptation;
- the establishment of internal escalation procedures for conflicts of law and the development of corresponding guidelines;
- the documentation of business decisions that could be perceived as compliance with foreign measures – especially where suppliers are excluded, transactions declined, or group-wide compliance requirements enforced; and
- the adaptation of supply chain compliance systems including data transfer processes and contractual arrangements with Chinese suppliers, particularly regarding cooperation, information, and audit obligations.
We would be happy to advise you on the implications of the new regulations for your business activities in China and to assist you in developing suitable global compliance strategies tailored to the Chinese market.
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