China enhances sanctions countermeasures amidst escalating trade tensions

The Provisions provides more detailed guidance on the protective measures available under the Anti-foreign Sanctions Law of 2021 (the "Anti-Sanctions Law"). They clarify that countermeasures can be taken against any foreign state that:

• violates international law and basic norms governing international relations by using any excuses or its domestic laws to contain and suppress China;
• takes discriminatory restrictive measures against any Chinese citizen or organisation;
• interferes in China’s internal affairs; or
• commits, assists in, or supports any conduct that compromises China’s sovereignty, security or development interests,

and any organisation or individual that:

• commits, assists in, or supports any conduct that compromises China’s sovereignty, security or development interests; or
• executes or assists in executing discriminatory restrictive measures imposed by foreign countries against Chinese citizens or organisations.

The power to implement countermeasures against actions that compromises China’s sovereignty, security or development interests was previously only referenced in article 15 of the Anti-Sanctions Law. This article states that the Anti-Sanctions Law applies mutatis mutandis to countermeasures against such actions. However, both the Anti-Sanctions Law and the Provisions leave undefined what is meant by "China’s sovereignty, security or development interests" and what threshold of conduct could compromise these interests.

In addition to these clarifications, article 19 of the Provisions grants the State Council the power to adopt countermeasures against foreign states, organisations or individuals that compromises the sovereignty, security, or development interests of China "by promoting or initiating litigation and other means". This includes those participating in the litigation and execution of judgments or any organisations and individuals related to them. It is further prohibited to execute or assist in the execution of any such judgment.

Countermeasures and penalties

The relevant countermeasures are consistent with those included in the Anti-Sanctions Law:

• placement on a countermeasures list;
• refusal to issue visa, denial of entry, cancelation of visa and deportation;
• seizure, impounding or freezing of property, including cash, equity, intellectual property rights, etc., within the territory of China;
• prohibiting or restricting on carrying out certain transactions, cooperation, and other activities with them; and
• other necessary measures, which include prohibiting or restricting import and export activities, investments within China and the provision of data or personal information; cancelling or restricting work permits, stay or residence qualifications; and imposing fines.

In addition to the above countermeasures, article 19 of the Provisions grants the State Council the power to adopt other more severe countermeasures including enforcement against the property of organisations or individuals that compromises the sovereignty, security, or development interests of China "by promoting or initiating litigation and other means".

In respect of organisations or individuals that execute or assist in executing discriminatory restrictive measures imposed by foreign countries against Chinese citizens or organisations, the Provisions only empower the relevant departments of the State Council to conduct interviews with, order corrective action or adopt corresponding measures. However, whether these corresponding measures equal the countermeasures listed in the Anti-Sanctions Law is unclear. The Provisions, like the Anti-Sanctions Law, also grant Chinese citizens and organisations the right to take legal action against any organisation or individual that assists in the execution of any discriminatory restrictive measure adopted against them by a foreign state. The available remedies include requesting an order to stop the infringement and claiming damages.

If countermeasures are adopted, the Provisionsfurther clarifies the penalties for failure to execute or implement these measures. Previously, the Anti-Sanctions Law only referred to such violations being dealt with "in accordance with the law" or by restrictions on certain activities. The Provisions now provide a catalogue of potential penalties. In addition to orders to take corrective action, the relevant departments of the State Council can impose restrictions on:

• engaging in government procurement, tendering and bidding;
• import and export of certain goods and technologies;
• international trade in services;
• cross-border transfer of data and personal information; and
• leaving or staying in China.

These penalties are relevant to organisations and individuals within the territory of China and therefore obligated to implement relevant measures. 

Trade tensions

China is strengthening their anti-sanctions framework at a time when trade tensions are escalating internationally. China is also increasingly taking a stance against what it perceives as threats to legitimate Chinese business interests.

On 12 May 2025, the US Commerce Department issued guidance that using Huawei Ascend chips anywhere in the world violates US export controls. This guidance was issued together with the announcement of the recission of Bide administration’s AI diffusion rule. The Ascend chips are powerful AI processors and potential competitors to the American Nvidia chips currently dominating this market. In response, on 15 May 2025, a spokesperson for the Chinese Ministry of Finance stated that these measures were a misuse of export controls to supress China that could constitute discriminatory restrictive measures under Chinese law. As such, any organisation or individual implementing or assisting in the implementation of these US measures would be at risk of violating the Anti-Sanction Law.

EU’s 17th package of sanctions against Russia, adopted on 21 May 2025, highlights another potential problem for international companies in China. While the 17th Package primarily targets the Russian shadow fleet, it also targeted so-called "industrial enablers" and suppliers of critical components to the Russian military, including six Chinese entities supplying machine tools and components for drone production. China has expressed its protest and accused the EU of "double standards", warning that the EU undermines legitimate commercial businesses. China has stated that it will take necessary measures to safeguard its rights and interests.

These recent developments highlight the challenges facing companies operating internationally. Companies must step carefully when navigating the fallout of the ongoing tensions.

Recommendations for companies

Stay informed 

International companies operating in China must stay informed not only on sanctions and export control regimes in the US, EU and their home jurisdiction, but also on potentially incompatible rules applicable to their China operations. Non-compliance can have serious consequences. Announcements from China’s Ministry of Foreign Affairs and the Ministry of Commerce often provide important guidance. Monitoring enforcement actions taken by Chinese authorities helps identify which activities are being targeted.

Review compliance programs and assess risks

Given the complex legal framework, it is crucial to have a compliance program that takes all relevant jurisdictions into account and includes procedures for monitoring and adaptation to changes. Companies should consider the Anti-Sanctions Law both in respect of their current China operations and when conducting sanctions screening to identify exposure to foreign sanctions that may be considered discriminatory by China. The likelihood and impact of being targeted by countermeasures should also be part of the general risk assessment of their business operations.

Seek legal advice

If violations or exposure are identified, companies should refrain from directly assisting in the execution of any foreign discriminatory restrictive measures against Chinese entities and seek legal advice. Even if a conflict between applicable sanctions and the obligations under the Anti-Sanctions Law seems unavoidable, it may be possible to seek exemptions either under the relevant sanctions regime or under the new exemption mechanism introduced by the Provisions. This allows companies to apply for permission to conduct activities that would otherwise be prohibited by sanctions or countermeasures. For companies that themselves are placed on China’s countermeasures list, it is also possible to appeal this decision and apply for modification or removal of the imposed measures.

Conclusion

With different sanctions regimes and several authorities involved, the situation for international companies in China is dynamic. Companies should be prepared to adapt their compliance strategies in response to any new developments or changes in the regulatory environment. Our team offers a multijurisdictional advisory service to assess a company's collective sanctions risks and provides practical advice on how to identify and mitigate sanctions risks.