China's Anti-Foreign Sanctions Law and Blocking Rules: A Compliance Guide for Multinationals

The following is general information on Chinese law, not legal advice for any specific matter. Rules and thresholds change from time to time, and the treatment of any situation depends on its facts; consult qualified PRC counsel before acting.

Three instruments, one purpose

China's response to what it calls "unjustified" extraterritorial sanctions rests on three instruments, all dating from 2020–2021. The Anti-Foreign Sanctions Law (反外国制裁法), adopted on 10 June 2021 and effective the same day, is the statutory foundation. It sits alongside the Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures — the "Blocking Rules" (阻断办法), issued as MOFCOM Order No. 1 of 2021 and effective 9 January 2021 — and the Unreliable Entity List (不可靠实体清单), established under MOFCOM Order No. 4 of 2020. Read together, they give China the tools to prohibit compliance with foreign sanctions, to retaliate against foreign entities that harm Chinese interests, and to give Chinese parties a damages claim against companies that cut them off to obey a foreign regime.

The Anti-Foreign Sanctions Law

The law authorises countermeasures against foreign states, organisations or individuals that adopt discriminatory restrictive measures against Chinese citizens or entities. Countermeasures can include denying visas or entry, seizing or freezing assets in China, and prohibiting transactions or cooperation. The part that matters most to a private company is the conduct obligation: a Chinese organisation or individual may not comply with, or assist in the enforcement of, the discriminatory measures the law targets — except where an exemption or a suspension order applies. The law also creates a private right of action: a party harmed by another's compliance with foreign sanctions can sue in a Chinese court for compensation. That turns a compliance decision made in New York or Brussels into potential exposure in a Beijing courtroom.

The Blocking Rules: refusing to comply with foreign extraterritorial laws

The Blocking Rules give companies a procedural path. Where a foreign law or measure improperly prohibits or restricts a Chinese party from engaging in normal economic and trade activity with a third country, the affected party must report it to MOFCOM within 30 days. MOFCOM may then issue a prohibition order (禁令) declaring that the foreign measure may not be recognised or enforced — and, in practice, must not be complied with. A Chinese party that suffers loss because another party complied with a prohibited foreign measure may claim compensation in a Chinese court, and the state may provide necessary support. The reporting obligation is the first trap: ignoring it is itself a compliance failure, even before any prohibition order is issued.

The Unreliable Entity List

The Unreliable Entity List is aimed outward at foreign entities that, for non-commercial reasons and in a discriminatory way, cut off normal transactions with Chinese enterprises, or take measures that seriously damage their interests. Listed entities can face restrictions or prohibitions on import and export and on investment in China, restrictions on personnel and transport entry, and fines. For a multinational, the risk is two-sided: a subsidiary's decision to terminate a supplier to satisfy a home-country sanctions list could put the group on China's list — and being on it can strand the group's China operations.

The compliance dilemma for multinationals

The core problem is structural: a company subject to US, EU or other sanctions obligations may be legally required to cut off a Chinese counterparty, while Chinese law may simultaneously forbid that very act. There is no way to fully comply with both. The prudent response is not to pretend the conflict away but to make it visible: map every relationship and transaction where home-country sanctions and Chinese countermeasures collide, and escalate each conflict through a defined internal process rather than letting a mid-level compliance officer decide in the dark. Where a prohibition order has been issued, the decision becomes starker still.

A practical approach

• Map the conflicts. Identify every counterparty, product line and payment flow that could trip both a home-country sanctions regime and the Chinese instruments.
• Track the lists. Monitor the Unreliable Entity List and any Blocking Rules prohibition orders, which change the obligations in real time.
• Honour the reporting duty. Where the Blocking Rules apply, the 30-day report to MOFCOM is an obligation, not an option.
• Escalate before terminating. A decision to cut off a Chinese counterparty can trigger the private right of action — route it through counsel before acting.
• Document the reasoning. The defensible position in either jurisdiction is a decision that is reasoned, dated and made on legal advice.

The three instruments are applied by the authorities on the latest official basis and on the facts of each situation; the summary above is general information current as of the date of writing. The sanctions dimension often overlaps with investment screening — for the related national-security gate, see our guide to China's foreign investment security review, and for the export side, China's Export Control Law: compliance and defense for foreign companies.