China Extends Legal Reach Against Sanctions

China is expanding its legal reach beyond its borders as it pushes back against US sanctions and export controls. The shift reflects Beijing’s effort to use law not only as a domestic governance tool, but as a way to contest American power in global commerce.

The strategy centres on a growing set of counter-sanctions measures and foreign-related legal tools. In May, China’s commerce ministry issued its first prohibition under a 2021 anti-foreign sanctions law to challenge US sanctions on five Chinese refiners accused of buying Iranian oil.

For companies, the risk is becoming more complex. A business that complies with US sanctions may face legal pressure in China, while one that ignores US restrictions may lose access to American markets, finance or technology. Sanctions compliance is therefore turning into a conflict between rival legal systems.

The wider legal issue is extraterritoriality. Washington has long used dollar clearing, export controls and financial sanctions to project power beyond US borders. Beijing is now building its own legal response, aiming to protect Chinese companies and strengthen China’s role in international rule-setting.

That does not remove the dominance of US sanctions, but it makes corporate decision-making more dangerous. Contracts, supply chains, banks and insurers may all be caught between competing legal demands. The next phase of sanctions law may be defined less by unilateral pressure than by jurisdictional collision, where courts, regulators and companies must decide which legal order carries the greater risk.