China has issued two State Council decrees that further develop its legal and institutional framework for responding to foreign measures applied on an extraterritorial basis and for safeguarding the security of industrial and supply chains.
- State Council Decree No. 834, Provisions of the State Council on the Security of Industrial and Supply Chains (the “Supply Chain Security Regulations”), effective March 31, 2026, establishes a formal framework for identifying, monitoring, and responding to risks affecting China’s industrial and supply chains.
- State Council Decree No. 835, Regulations of the People’s Republic of China on Countering Unjustifiable Extraterritorial Jurisdiction Measures Imposed by Foreign States (the “Counter‑Extraterritoriality Regulations”), effective April 7, 2026, refines China’s mechanism for identifying and responding to foreign laws and enforcement measures applied extraterritorially in China.
Both decrees operate alongside existing instruments, including the Anti‑Foreign Sanctions Law (“AFSL“), China’s blocking rules, and the Unreliable Entities List (“UEL“) regime. Taken together, they further clarify how China approaches conflicts arising from foreign sanctions, export controls, and other extraterritorial measures, particularly where such measures are viewed as affecting Chinese entities, transactions, or supply chains.
Counter‑Extraterritoriality Regulations (Decree No. 835)
Scope of “unjustifiable extraterritorial jurisdiction”
- The Counter‑Extraterritoriality Regulations set out factors relevant to determining whether certain foreign measures are ‘unjustifiable’ under PRC law. In particular, authorities are to consider:
- whether a foreign measure is applied extraterritorially, including the presence or absence of an appropriate jurisdictional touchpoint to the foreign state concerned; and
- whether implementation of the measure causes, or threatens to cause, harm to Chinese entities or individuals.
These elements are expressly identified in the Regulations and form the basis for subsequent regulatory action.
Identification mechanism
The Counter‑Extraterritoriality Regulations establish a formal mechanism under which competent State Council departments may identify foreign measures that constitute unlawful extraterritorial jurisdiction and issue a public announcement to that effect.
Once a foreign measure is so identified, entities and individuals within China may be prohibited from implementing or assisting in implementing that measure, unless approval is granted through the prescribed process.
Prohibitive orders
The Counter‑Extraterritoriality Regulations also introduce prohibitive orders, under which authorities (including the Ministry of Commerce (“MOFCOM“)) may direct specific entities to refrain from implementing identified unjustifiable extraterritorial measures.
Prohibitive orders may be entity‑specific and activity‑specific. Where a prohibitive order is issued and subsequently violated, the Regulations contemplate the imposition of fines and other restrictive measures. While these consequences are most clearly articulated with respect to Chinese entities, the application to foreign entities remains framed through broader countermeasure provisions.
Approval mechanism and Malicious Entities List
The Regulations further provide a mechanism allowing entities or individuals to apply for approval from the relevant Chinese authorities to implement otherwise unjustifiable foreign measures where legitimate grounds exist.
They also introduce a Malicious Entities List (“MEL“), targeting foreign entities and individuals that implement or assist in implementing unjustifiable extraterritorial jurisdiction measures. The MEL operates alongside existing AFSL and UEL lists and aligns with the refined definition of unjustifiable measures under the Regulations.
Supply Chain Security Regulations (Decree No. 834)
The Supply Chain Security Regulations establish a system‑level framework for safeguarding the security and resilience of China’s industrial and supply chains.
Key features include:
- a coordinated, whole‑of‑government mechanism involving central and local authorities;
- the identification and dynamic adjustment of “key sectors” for supply chain security purposes;
- risk monitoring, early‑warning, and emergency response mechanisms; and
- investigatory and response tools where foreign measures or conduct are considered to pose risks to China’s industrial or supply chains.
While the Regulations do not impose direct, standalone compliance obligations on entities, they provide a legal foundation for enhanced monitoring, intervention, and countermeasures where supply chain stability is linked to national security or economic concerns.
Overall observations
The two State Council decrees reinforce a broader policy direction in which industrial security, supply chain resilience, and responses to foreign extraterritorial measures are treated as interconnected elements of China’s national security and economic governance framework. The emphasis is on centralized identification, coordinated responses, and the integration of new mechanisms with existing sanctions and countermeasures‑related regimes. We will continue to monitor the developments and provide further updates as implementation and enforcement develop. Please reach out to the author or any member of our trade team if you have any questions.
Frank Pan is a partner of FenXun Partners, a premier Chinese law firm, which established a Joint Operation Office with Baker McKenzie in China in 2015 with the approval of the Shanghai Justice Bureau.
