As the US-China summit in Beijing concluded, the immediate political message may be one of managed engagement rather than open escalation. President Xi Jinping has reportedly referred to a “new positioning” in US-China relations, while also warning that Taiwan remains a central source of potential instability. For international businesses, the legal takeaway is more sober: diplomatic engagement does not remove the growing complexity of China’s counter-sanctions and anti-extraterritoriality framework.
China’s sanctions architecture is not a mirror image of the US, EU or UK systems. It is less a standing set of outward-facing sanctions programmes and more a combination of counter-sanctions, blocking, unreliable entity, export control and economic security tools. The centre of gravity is defensive and retaliatory: China seeks to protect Chinese entities from foreign sanctions, export controls and “long-arm” jurisdiction, while reserving the ability to impose countermeasures where China considers its sovereignty, security or development interests to be harmed.
Recent developments
Recent developments are significant. In March 2025, China issued Implementing Regulations for the Anti-Foreign Sanctions Law (《实施<反外国制裁法>的规定》). These regulations clarified the available countermeasures, including seizure, detention and freezing of assets, restrictions on relevant transactions, cooperation and other activities, and the strengthening of enforcement coordination between State Council departments. They also allow a person subject to countermeasures to request suspension, modification or cancellation where they rectify their conduct and mitigate the consequences.
In April 2026, China's State Council published new Regulations on Countering Foreign States’ Unjustified Extraterritorial Jurisdiction Measures (《反不当域外管辖条例》). These rules apply where foreign measures violate international law or basic norms of international relations and harm China’s sovereignty, security, development interests, or the legitimate rights and interests of Chinese citizens or organisations. The rules create a “malicious entity list”, prohibit organisations and individuals from enforcing or assisting in enforcing unlawful foreign jurisdiction measures, and allow affected Chinese citizens and organisations to bring claims.
These rules sit alongside China’s Anti-Foreign Sanctions Law (《反外国制裁法》) and Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures (《阻断外国法律与措施不当域外适用办法》; "Blocking Rules"), both issued in 2021. The Blocking Rules require Chinese citizens, legal persons and other organisations to report within 30 days where foreign laws or measures restrict them from normal trade with third states or regions. China's Ministry of Commerce ("MOFCOM") may issue a prohibition order requiring that the relevant foreign measure must not be recognised, implemented or complied with, and an affected Chinese party may sue for compensation if another party complies with the blocked foreign measure and causes loss.
The most concrete recent example is MOFCOM’s 2 May 2026 prohibition order concerning US sanctions on five Chinese companies over alleged Iran oil transactions. MOFCOM stated that the US measures involved unjustified extraterritorial application, and ordered that the specified US SDN listing, asset-freezing and transaction-ban measures must not be recognised, implemented or complied with.
Implications
For international companies, the practical risk is no longer limited to whether they themselves are named on the Unreliable Entity List by China. The greater day-to-day risk is conflict: a global compliance team may recommend that a China subsidiary stops dealing with a customer or supplier because of US, EU or UK sanctions, while the China team may face PRC reporting, blocking, discrimination or litigation risk if it implements that instruction without local analysis.
Companies with China operations should therefore treat China-nexus sanctions decisions as escalation events. Before refusing supply, terminating a contract, withholding payment, suspending technical support or communicating a sanctions-related reason to a Chinese counterparty, the business should map the applicable legal regimes, the entity taking the decision, the role of China-based personnel, and the exact wording to be used externally.
The implications for re/insurers are equally important. The UK insurance sector already faces sanctions risk through the provision of insurance and reinsurance, claims payments, and activities that may be treated as circumvention in certain circumstances. For the London Market, China’s counter-sanctions framework adds a further layer of complication: the issue may not only be whether UK, EU or US sanctions prevent cover or claim payment, but whether reliance on those sanctions creates PRC law or PRC litigation risk where the insured, risk, claim, intermediary or underlying trade has a China nexus.
In these circumstances, areas of consideration for the London market should include, sanctions due diligence arrangements where China-linked insureds, risks and reinsurance arrangements are engaged; claims-handling protocols for cases where UK, EU or US sanctions concerns conflict with PRC blocking or counter-sanctions risk; and sanctions clauses and endorsements to ensure they deal appropriately with sanctions prohibitions, blocking laws and local law constraints.
China’s counter-sanctions framework continues to develop, and many practical operations questions for multinationals and the London re/insurance market will increasingly benefit from PRC law input.
