Beijing is rolling out a new layer of legal weapons designed to hit back at US and European sanctions, and foreign companies operating in China are the ones who will feel the squeeze.
The latest package builds on three pieces of legislation enacted or drafted since March 2026. Taken together, they give China the most aggressive counter-sanctions apparatus it has ever possessed.
The first is State Council Order No. 834, the “Supply Chain Security Regulation,” enacted April 7. It authorizes Beijing to retaliate against any foreign act that “disrupts, destroys or discriminates against” Chinese industry or supply chains. The penalties include import-export bans, investment prohibitions, entry bans and asset freezes. The language is broad enough to cover almost any foreign trade or technology restriction China dislikes.
The second, Order No. 835, the “Regulation Against Improper Extraterritorial Jurisdiction,” went into effect April 13. It goes far beyond China’s 2021 blocking statute. It creates a “malicious entity list,” foreign companies that implement, participate in, or advocate for extraterritorial measures can be placed on it, facing visa denials, asset freezes, transaction bans and data access restrictions. It also grants a private right of action: any injured Chinese party can sue a foreign company for complying with foreign sanctions.
The third is a proposed “Procuratorial Public Interest Litigation Law,” submitted for its second reading in June. If passed later this year, it would allow Chinese prosecutors to sue foreign organizations and individuals directly for harming “national interests or public interests.”
The trigger for this legislative blitz is clear. Washington has expanded chip export controls, launched two Section 301 investigations into Chinese trade practices, and maintained the Uyghur Forced Labor Prevention Act. The European Union has imposed anti-subsidy tariffs of up to 35 percent on Chinese electric vehicles and launched investigations under its Foreign Subsidies Regulation.
Foreign firms are caught in the middle. James Hsiao, a partner at White & Case in Hong Kong, told Al Jazeera that companies are worried these measures “may affect normal business transactions.” Trivium China, a Beijing-based consultancy, described the situation as foreign enterprises “increasingly caught between America’s rock and China’s hardline stance.”
China has already begun using the new tools. In May, it invoked its 2021 Blocking Law for the first time, prohibiting Chinese citizens and companies from complying with US sanctions on Iranian oil purchases by Chinese “teapot” refineries. The same month, the Ministry of Justice ruled that an EU investigation into Chinese surveillance company Nuctech constituted “improper extraterritorial jurisdiction” and banned any person or organization from cooperating with it.
For a foreign company operating in China, the risk calculus has changed. Comply with US or EU sanctions, and China may sue you, freeze your assets, or put you on a blacklist. Comply with Chinese counter-sanctions, and you risk violating the very US or EU laws those sanctions were meant to enforce.
Beijing is making clear that the era of passive acceptance is over. Foreign firms that thought they could navigate geopolitics by staying neutral are learning that neutrality is no longer an option.