China's countersanctions push adds 67 entities as enforcement accelerates

China's countersanctions framework has moved from legislative build-up to active enforcement, with 67 entities added to the Unreliable Entity List in 2025 alone.

China's State Council issued two April regulations giving Beijing authority to block foreign sanctions and extraterritorial jurisdiction, a shift that has already placed 67 entities on the Unreliable Entity List in 2025.

"Neither MOFCOM's first blocking order in May, nor MOJ's first identification of improper extraterritorial jurisdiction, was isolated or sudden," said Ren Qing, partner at Global Law Office.

The regulations — Decree No. 834 on industrial and supply chain security and Decree No. 835 on countering foreign unlawful extraterritorial jurisdiction — took effect April 7 and April 13. On May 2, MOFCOM invoked the 2021 Blocking Rules to bar recognition of U.S. sanctions on Hengli Petrochemical (Dalian) Refining and four other Chinese refiners. On May 15, the Ministry of Justice issued its first determination under Decree No. 835, blocking cooperation with the European Commission's Foreign Subsidies Regulation probe into security-screening manufacturer Nuctech.

The enforcement wave follows a 22-fold surge in Unreliable Entity List designations, from three in 2024 to 67 in 2025, with more than 100 organizations and individuals designated over the same year. For multinationals, the framework now carries operational risk: Chinese courts have applied Article 12 of the Anti-Foreign Sanctions Law in at least two cases to block foreign sanctions as a defense for non-performance, and PVH Corp. was placed on the Unreliable Entity List after its Xinjiang-related compliance triggered regulatory countermeasures.

Designations Jump 22-Fold to 67

The legal toolkit behind China's countersanctions measures has been at least six years in the making, starting with the Unreliable Entity List rules in 2020, followed by the Blocking Rules in 2021, and culminating in the Anti-Foreign Sanctions Law (AFSL), which elevated countersanctions authority to statute level. Before the recent enforcement actions, China's foreign ministry and MOFCOM had already placed more than 200 foreign entities and individuals on the Countermeasures List under the AFSL, while MOFCOM had separately designated around 70 foreign entities on the Unreliable Entity List.

Wendy Wysong, managing partner of Steptoe's Hong Kong office, said the Nuctech ruling raises the stakes for multinational companies. "The speed with which the Nuctech order followed the issuance of Decree No. 835 reflects a decisive shift from legislative framework to concrete enforcement," she said. "It is also notable that the MOJ has been positioned as the competent authority to identify improper extraterritorial measures and issue prohibition orders under Decree No. 835, marking a structural shift from the earlier MOFCOM-led approach."

Courts Test Article 12

Chinese courts have begun invoking the AFSL to block foreign unilateral sanctions in civil litigation. In November 2024, the Nanjing Maritime Court heard a case in which a Chinese marine engineering company sued a foreign equipment company for failure to pay after the former was sanctioned over alleged violations of U.S. sanctions against Russia — the first successful private cause of action under AFSL Article 12. In a separate maritime cargo transport dispute between a Hong Kong company and a Singapore shipping company, the Shanghai Maritime Court applied Article 12 to establish that foreign unilateral sanctions against Chinese citizens or entities cannot serve as a defense for refusing to perform contractual obligations.

For multinationals, the implications extend beyond government enforcement. "PRC countermeasures and prohibition orders must now be treated as an operational reality, requiring continuous monitoring and the careful calibration of internal processes to ensure that cross-border activities do not inadvertently trigger regulatory exposure in China," Wysong said. She advised companies to avoid expressly tethering contract termination to non-Chinese sanctions, export controls, or sensitive human rights considerations, and instead ground contractual disengagement in neutral, commercially driven justifications.

The framework is likely to keep expanding as Beijing further enriches its countersanctions toolkit. Fangda Partners described the recent wave of rules and enforcement actions as reflecting "a deliberate, systematically advanced and proactively positioned strategy" in China's countersanctions build-out. Ren said the blocking mechanisms are defensive by design and restrained in practice, with exemption procedures available where compliance is unavoidable.

This article is for informational purposes only and does not constitute investment advice.