• In May, China invoked two of its blocking regulations for the first time. Unlike earlier cases in which China retaliated against foreign sanctions with targeted countersanctions on foreign firms, the actions in May prohibited third parties from complying with or implementing the offending foreign measures.
• On May 2, 2026, the Ministry of Commerce issued its first prohibition order under a 2021 blocking regulation, forbidding all Chinese individuals and entities (including Chinese subsidiaries of foreign companies and foreign nationals in China) from recognizing, implementing or complying with U.S. sanctions against five Chinese refineries linked to trade with Iran. On May 15, 2026, the Ministry of Justice determined that the European Union’s Foreign Subsidy Regulation investigation of Chinese security devices company Nuctech was an “improper extraterritorial jurisdiction measure” under State Council Order 835, marking its first use since it was issued in April 2026. Unlike the MOFCOM prohibition order, this measure arguably applies extraterritorially.
• Noncompliance can result in administrative penalties, restrictions in access to the Chinese market and restrictions on entry or exit from China. The regulations also create private rights of action for Chinese parties injured by others’ compliance with the offending foreign measures.
• When complying with potential conflicting foreign regulations, companies operating in China should be mindful of the different concerns underlying China’s use of its blocking regulations: (i) perceived discrimination against China or Chinese parties; (ii) perceived violations of Chinese sovereignty; and (iii) concerns about the transfer of data abroad. 

In the first half of May, China announced two countermeasures against EU and U.S. actions deemed to be intrusions on Chinese sovereignty. First, China issued its first official “prohibition order” under a blocking regulation, effectively forbidding Chinese parties from implementing or cooperating with new U.S. sanctions against five Chinese refineries. Second, and more unexpectedly, China announced the first use of the recently adopted Regulations on Countering Improper Extraterritorial Jurisdiction (“Order 835”), prohibiting cooperation with an EU Foreign Subsidy Regulation (“FSR”) investigation of a Chinese company. While China has previously retaliated against foreign sanctions by counter-sanctioning a small number of foreign firms, the two announcements in May are the first invocations of regulations broadly prohibiting cooperation with specific foreign actions. The invocation of Order 835, in particular, could have broader implications, as it is not merely tit-for-tat retaliation but an expression of displeasure at perceived overly invasive EU regulations.

The MOFCOM Blocks U.S. Sanctions on Chinese Refineries. On May 2, 2026, China’s Ministry of Commerce (“MOFCOM”) issued a prohibition order forbidding Chinese individuals and entities (including Chinese subsidiaries of foreign entities and foreign nationals in China) from recognizing, implementing or complying with United States sanctions against five Chinese refineries allegedly involved in trade with Iran. The prohibition order was promulgated under the 2021 Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation (the “2021 Blocking Regulation”), with additional reference to the National Security Law, the Law on Foreign Relations and the Anti-Foreign Sanctions Law.

The prohibition order was the first issued under the 2021 Blocking Regulation, although China has previously punished foreign companies’ compliance with what it deems other countries’ “discriminatory restrictive measures” by placing them on the Unreliable Entity List. In doing so, China has stressed that it “exercises prudence” in targeting a “very small number of firms” for inclusion. The prohibition order can be seen as continuing this measured approach: it was issued under the 2021 Blocking Regulation rather than the more recent Order 835, which arguably has broader extraterritorial application.

Under the 2021 Blocking Regulation, a Chinese person or organization that fails to comply with the prohibition order may face administrative penalties such as warnings, fines and correction orders, although exemptions may be sought from MOFCOM. Local subsidiaries of non-Chinese companies must fully comply with the prohibition order, notwithstanding any conflicting global corporate policies. The prohibition order also provides a legal basis for Chinese parties to sue any party, including foreign companies, for damages arising from the other party’s compliance with the foreign sanctions.

The MOJ Determines EU FSR Investigation of a Chinese Company is an “Improper Extraterritorial Jurisdiction Measure”. On May 15, 2026, the Ministry of Justice (“MOJ”) announced that the European Union’s investigation under the FSR related to Nuctech, a Chinese security devices supplier, constituted “improper extraterritorial jurisdiction measures” (“Announcement 5”). Announcement 5 was the first use of April’s State Council Order 835 and took effect from the date of publication.

Unlike the prohibition order under the 2021 Blocking Regulation discussed above, which applies to Chinese parties, Announcement 5 provides that no organization or individual shall execute or assist in executing the identified improper extraterritorial jurisdiction measures. Although Announcement 5 appears to be directed at the European Union’s attempts to gather information inside China, Order 835 arguably applies extraterritorially, with potential implications for persons and entities outside China cooperating with the EU FSR investigation. However, it is unclear what practical obligations would be imposed on foreign parties outside of China, as EU investigative requests directed to parties outside China (especially within the European Union) might not be deemed to be “improper extraterritorial measures” under the factors set out in Article 6 of Order 835. Like the 2021 Blocking Regulation, Order 835 includes a private right of action, which potentially could be invoked by a Chinese party for actions outside of China that result in damages.

The prompt use of Order 835 to issue Announcement 5 is notable. It took five years for China to issue a prohibition order under the 2021 Blocking Regulation but only one month to invoke Order 835. Announcement 5 is also not simply retaliation against foreign sanctions but an attempt to block a foreign trade and competition investigation involving a Chinese company.

The trade-related purpose of Announcement 5 is made clear in associated Q&As issued by MOJ and MOFCOM spokespersons. Although Announcement 5 addresses only the EU’s investigation of Nuctech, the official Q&As challenge the FSR itself. The MOJ described the European Union’s cross-border demands for “broad and unnecessary information” within China and characterized FSR investigations as “discriminatory” and “‘protectionism’ under the guise of ‘fair competition’.” This follows MOFCOM’s January 2025 categorization of the FSR as creating “trade and investment barriers” and objections to EU attempts to compel Chinese banking institutions to cooperate while “unreasonably demanding extensive information within China unrelated to the investigations.”

The Global Times, a Chinese state-owned media outlet that often takes a more hawkish line than the government, went further. After discussing the MOJ’s announcement, it called out the European Union’s Industrial Accelerator Act and Cybersecurity Act as examples of “de-risking to actually de-cooperate,” warning that China could retaliate against those measures as well. While the Global Times did not specify what form such retaliation would take, State Council Order 834, the Provisions on Industrial and Supply Chain Security, which was issued a week before and mirrors the obligations of Order 835, would provide one legal basis for doing so.

Announcement 5 is also consistent with broader PRC hostility towards foreign investigations in China, as expressed in the 2018 International Criminal Judicial Assistance Law. Unlike that more general law, however, Order 835 provides the Chinese government the ability to block foreign investigations relating to trade, merger control, fraud, corruption and other areas, backstopped by potential enforcement under Order 835.

Practical Implications of China’s Concerns with Extraterritorial Measures. In assessing the risks of complying with foreign sanctions against or investigations of Chinese entities, it is important to recognize the different concerns that Chinese laws and regulations address. May’s prohibition order addresses the ability of China to retaliate against foreign actions deemed to discriminate against Chinese companies. Other retaliation mechanisms are found in the Anti-Foreign Sanctions Law, the Unreliable Entities List, and Orders 834 and 835. Such retaliatory measures have thus far been used sparingly.

While also addressing perceived discrimination, Announcement 5 reflects China’s concerns about perceived violations of Chinese sovereignty and a desire to control the transfer of information abroad. These concerns are also reflected in the Data Security Law the prohibitions on certain supply chain investigations referred to in Order 834 and elsewhere. As noted in the Q&A around Announcement 5, China objected to both the invasiveness and breadth of the Nuctech investigation. The same concerns are not limited to trade disputes or measures perceived to be aimed at China, either by intent (like the UFLPA) or in effect (like the FSR). Potential targets include supply chain and ESG regulations like the European Union’s CSDDD. In complying with potentially conflicting regulatory requirements, companies operating in China should be mindful of these two concerns, avoiding what could be perceived as overly broad requests for information from business partners and addressing concerns about invasiveness by keeping raw data inside China whenever possible.

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