Since 2020, China has steadily expanded its economic security toolkit to counter Western trade and financial restrictions. What began as a largely defensive framework has evolved into a more assertive Chinese legal architecture designed to penalize companies and individuals for complying with foreign sanctions and export controls. Beijing has been especially eager to undercut Western policies of extraterritoriality, whereby various governments, most notably the United States, extend sanctions to foreign firms and individuals doing business with the primary sanctions target.

Beijing’s countermeasures now include the Export Control Law (2020), the Unreliable Entity List (2020), the Anti-Foreign Sanctions Law (2021), the Blocking Rules (2021), the Counter-Extraterritorial Regulation (2026), and the Supply Chain Security Provisions (2026). Taken together, these instruments mark a significant shift in the country’s approach. Beijing is systematically building mechanisms to resist Western extraterritoriality and replicate it with extraterritorial regulation of its own, thereby imposing its jurisdiction beyond China’s borders. The resulting legal environment puts foreign companies in a bind: They can face legal exposure in the West for violating Western sanctions—and in China for complying with them.

Since 2020, China has steadily expanded its economic security toolkit to counter Western trade and financial restrictions. What began as a largely defensive framework has evolved into a more assertive Chinese legal architecture designed to penalize companies and individuals for complying with foreign sanctions and export controls. Beijing has been especially eager to undercut Western policies of extraterritoriality, whereby various governments, most notably the United States, extend sanctions to foreign firms and individuals doing business with the primary sanctions target.

Beijing’s countermeasures now include the Export Control Law (2020), the Unreliable Entity List (2020), the Anti-Foreign Sanctions Law (2021), the Blocking Rules (2021), the Counter-Extraterritorial Regulation (2026), and the Supply Chain Security Provisions (2026). Taken together, these instruments mark a significant shift in the country’s approach. Beijing is systematically building mechanisms to resist Western extraterritoriality and replicate it with extraterritorial regulation of its own, thereby imposing its jurisdiction beyond China’s borders. The resulting legal environment puts foreign companies in a bind: They can face legal exposure in the West for violating Western sanctions—and in China for complying with them.

Designed as an instrument of self-defense, the Anti-Foreign Sanctions Law is central to this shift. Article 12 of the law gives Chinese individuals and entities a private right to sue another person or company that implements, or assists in implementing, foreign restrictive measures that harm Chinese interests. In practice, this allows Chinese counterparties to sue when foreign firms refuse to perform contractual obligations on the basis of sanctions or export-control risks.

The first reported case involving Article 12 arose before the Nanjing Maritime Court in 2024. After a Chinese offshore engineering contractor was listed by a foreign jurisdiction, its Swiss counterparty withheld almost $12 million in outstanding payments under a shipbuilding-related subcontract, citing sanctions concerns. The Chinese company obtained a preservation order from the court, arresting the vessel........

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