New Guidelines for Implementing China’s Anti-Foreign Sanctions Law: What Foreign Companies Need to Know

The State Council has released new regulations detailing the implementation of China’s Anti-Foreign Sanctions Law, expanding countermeasures and clarifying consequences for non-compliance. The regulations heighten legal and financial risks for multinationals operating in both China and foreign jurisdictions that have imposed sanctions against Chinese entities, underscoring the need for comprehensive risk assessments and legal guidance.

On March 23, 2025, the State Council released a new set of regulations guiding the implementation of China’s Anti-Foreign Sanctions Law (AFSL).

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The AFSL, which came into effect on June 10, 2021, was formulated to provide the Chinese government with a legal toolkit to counter what it deems discriminatory or restrictive economic measures taken against its companies or citizens. The law has been widely interpreted as a mechanism to counter economic sanctions and restrictions imposed by the US in the wake of the Trump administration’s aggressive economic policies, as well as similar actions taken by the EU and other regions.

The new regulations introduce specific guidelines on how the AFSL will be implemented, clarifying procedural aspects, expanding the scope of countermeasures, and specifying consequences for non-compliance.

The AFSL is of particular concern to multinationals operating in both China and abroad, especially those with substantial operations in Western countries. This article outlines the key aspects of the new regulations, their implications for foreign companies, and recent cases of countermeasures implemented under the AFSL.

What does the AFSL do?

The most important power granted to the Chinese government by the AFSL is stipulated in Article 3, which states that China has the right to take corresponding countermeasures “if a foreign country violates international law and basic norms governing international relations, uses various pretexts or its own laws to contain and suppress China, adopts discriminatory or restrictive measures against Chinese citizens and organizations, and interferes in China’s internal affairs”.

Moreover, the AFSL enables the State Council to include individuals and organizations that “directly or indirectly participate in the formulation, decision, and implementation of discriminatory restrictive measures” on the “countermeasure list”.

The following people and organizations can also be added to the countermeasure list:

1. Spouses and immediate family members of individuals included in the countermeasure list;
2. Senior management personnel or actual controllers of organizations included in the countermeasure list;
3. Organizations in which individuals included in the countermeasure list serve as senior management personnel; and
4. Organizations that are actually controlled, established, or operated by individuals or organizations included in the countermeasure list.

Companies or individuals placed on the countermeasures list can be subject to the following measures, depending on the situation and the decision taken by the relevant State Council department:

1. Be denied visa issuance, entry, have their visa cancelled, or be deported;
2. Have their movable property, immovable property, or other types of property within the territory of China seized, distrained, or frozen;
3. Be prohibited or restricted from engaging in relevant transactions, cooperation, or other activities with organizations or individuals within the territory of China; and
4. Other necessary measures.

The State Council can suspend, modify, or cancel the relevant countermeasures if the circumstances under which the countermeasures were taken change.

Consequences for non-compliance

Companies and individuals located in China are obliged to fulfill the countermeasures imposed under the AFSL and are liable to certain legal repercussions if they do not comply. This includes being restricted or prohibited from engaging in relevant activities.

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Moreover, organizations and individuals are prohibited from implementing or assisting in the implementation of any discriminatory or restrictive measures taken by a foreign country against Chinese citizens and organizations.

If organizations and individuals violate the provisions of the preceding paragraph and infringe upon the legitimate rights and interests of Chinese citizens and organizations, they may file a lawsuit with the people’s court in accordance with the law to require them to stop the infringement and compensate for the losses.

The AFSL does not state whether organizations or individuals are prohibited from implementing the measures taken by foreign companies must be in China, suggesting that companies that comply with measures taken by a foreign country in that country’s territory could be in violation of the AFSL. This means multinationals operating in both China and overseas may find themselves stuck between competing legal requirements, compelled to implement the sanctions of one country but prohibited from doing so by China.

What do the new regulations stipulate?

State Council investigations and assessments

The new regulations authorize relevant State Council departments to conduct investigations and external consultations to assess the necessity of countermeasures.

Departments that impose countermeasures are now required to assess the effectiveness of such measures and may suspend, modify, or cancel countermeasures based on the findings of these assessments.

Clarified definition of property subject to seizure

The new regulations clarify that “other types of property” that can be seized as a result of being placed on the countermeasures list include cash, bank deposits, securities, equity, intellectual property, accounts receivable, and other financial assets.

Broadened scope of prohibited transactions

The new regulations clarify that the “relevant transactions, cooperation, or other activities” from which companies that could be taken against companies or individuals placed on the countermeasures list include (but are not limited to) activities in the fields of:

• Education;
• Science and technology;
• Legal services;
• Environmental protection;
• Economy and trade;
• Culture;
• Tourism;
• Health; and
• Sports.

Moreover, the “other necessary measures” include (but are not limited to):

• Being prohibited or restricted from taking part in import and export activities related to China;
• Being prohibited or restricted from investing in China;
• Being prohibited from the provision of exports from China;
• Being prohibited or restricted from the provision of data and personal information from China;
• Having the work permit, stay, or residence qualification of relevant personnel in China canceled or restricted; and
• Being subject to a fine.

Enhanced public lawsuit provisions

Individuals or entities that implement or assist in the implementation of foreign sanctions against Chinese entities or citizens may face lawsuits filed by affected Chinese individuals or organizations. These lawsuits can demand the cessation of the harmful actions, request financial compensation for damages incurred, and even seek punitive damages for any negative impacts suffered by the plaintiffs due to the foreign sanctions. The legal actions aim to protect Chinese interests from any interference, and those found liable could face significant financial and reputational consequences.

Specific consequences for non-compliance

Entities that fail to comply with countermeasures may be subject to a wider array of punitive actions. These can include restrictions on government procurement, exclusion from bidding processes, suspension of import and export licenses, limitations on international trade in services, asset freezes, and financial penalties.

Appeal process

Organizations and individuals subject to countermeasures may apply for suspension, modification, or cancellation of such measures by providing evidence of corrective actions taken, demonstrating that they have ceased the infringing conduct, rectified any damages caused, and implemented measures to prevent future violations. The application must detail the steps taken to comply with the AFSL, including internal audits, compliance training, and termination of any agreements or activities deemed to have facilitated foreign sanctions.

Stricter wording on the implementation of foreign sanctions

Entities promoting or implementing litigation against Chinese entities at the behest of foreign governments may be added to the countermeasure list and face asset freezes, transaction bans, visa restrictions, prohibitions on cooperation with Chinese entities, and other punitive measures as determined by relevant State Council departments. This can include barring the transfer of sensitive data, imposing fines, and limiting access to certain sectors of the Chinese economy.

How has the AFSL been used so far?

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The AFSL does not specify what constitutes discriminatory or restrictive measures, granting the State Council broad discretion in determining what actions warrant countermeasures. In practice, the AFSL has been used against entities that have imposed sanctions, export controls, or investment restrictions targeting Chinese companies, as well as those participating in legal actions perceived to undermine China’s sovereignty or economic interests.

The AFSL was first used on July 23, 2021, when China announced countermeasures against seven US citizens and entities, including former Commerce Secretary Wilbur Ross, in retaliation for US sanctions against Chinese officials in Hong Kong.

On October 10, 2024, the Chinese Ministry of Foreign Affairs (MFA) imposed countermeasures against US defense contractors and their executives in response to US arms sales to Taiwan. Companies targeted included Skydio, Huntington Ingalls Industries, and Scadio, with asset freezes and bans on transactions with Chinese entities.

On December 5, 2024, the MFA imposed countermeasures against 13 US defense firms and six senior executives in response to US arms sales to Taiwan. The measures included asset freezes, transaction bans, and entry restrictions.

What do the new regulations mean for foreign companies in China?

The new regulations significantly tighten the implementation of the AFSL, effectively broadening the scope and impact of countermeasures. By enabling public lawsuits against companies that assist in the implementation of foreign sanctions, the regulations place additional legal and financial risks on multinationals operating in both China and countries imposing sanctions against Chinese entities.

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The new provisions requiring relevant State Council departments to assess the necessity of countermeasures indicate that such measures cannot be imposed arbitrarily and are subject to more rigogrous scrutiny. As a result, the scope of implementation may be more limited. Additionally, this requirement could provide companies with some recourse to seek adjustments, modifications, or cancellations of countermeasures based on the assessment outcomes. This reinforces the need for companies to closely monitor regulatory developments, consult with local legal advisors, and prepare contingency plans to respond swiftly to potential policy shifts.

Foreign companies must now thoroughly assess their exposure to risks posed by the AFSL, particularly in cases where compliance with foreign sanctions could be perceived as a violation of the AFSL. In this context, obtaining comprehensive legal guidance is critical to navigating the complex landscape of conflicting legal requirements and mitigating the potential consequences of non-compliance in China.

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