China's New Sanctions Rules: Navigating Risks for Foreign Companies

On March 24, 2025, China introduced significant regulatory enhancements through the promulgation of the "Regulations on the Implementation of the Anti-Foreign Sanctions Law." Signed into effect by Premier Li Qiang, these regulations reinforce China's stance against foreign sanctions perceived as threats to its sovereignty, security, and development interests. This development is poised to substantially impact foreign enterprises operating within China, necessitating immediate attention and strategic action by global businesses.

Key Features of the New Regulations

The newly enacted regulations include several critical measures:

• Comprehensive Asset Freezes: The scope of potential asset freezes has expanded significantly, now explicitly covering cash, bank deposits, equity stakes, intellectual property rights, and accounts receivable. This broad definition effectively encompasses nearly all types of corporate assets.

• Operational and Transactional Restrictions: Companies identified as supporting or implementing foreign sanctions face prohibitions or severe restrictions in engaging in commercial transactions and cooperation across numerous sectors, including technology, legal services, education, environmental protection, trade, culture, health, and sports.

• Legal Accountability and Litigation: The regulations empower affected Chinese individuals and entities to initiate lawsuits in Chinese courts against foreign entities that enforce or support foreign sanctions, opening up new litigation risks for international businesses.

Immediate Implications for Foreign Companies

Foreign enterprises operating in China now face heightened challenges, specifically:

1. Complex Compliance Risks: Companies face an increasingly difficult compliance environment, confronting a potential conflict between international sanctions and Chinese legal requirements. Adherence to foreign sanctions could directly trigger significant penalties under Chinese law, complicating global compliance strategies.

2. Increased Legal Vulnerabilities: The explicit provision for Chinese entities to litigate against companies perceived as aiding foreign sanctions introduces a substantial new legal risk. Foreign businesses must be prepared for potential lawsuits and the associated financial and reputational costs.

3. Operational Uncertainty: The extensive range of sectors and assets covered under these regulations injects considerable uncertainty into the operational environment. Companies will now have to manage greater unpredictability in daily operations, investment strategies, and partnership decisions.

Strategic Response for Businesses

Given these stringent new regulations, foreign companies should urgently consider the following strategic steps:

• Enhanced Due Diligence and Risk Assessment: Businesses should conduct immediate and thorough reviews of current operations and partnerships to identify potential compliance risks and areas of vulnerability under the new regulatory framework.

• Revamped Compliance Frameworks: Updating compliance programs to account for the complexities introduced by the new regulations is crucial. These frameworks must address potential conflicts between international sanctions compliance and local Chinese law.

• Proactive Stakeholder Engagement: Maintaining open and constructive dialogues with regulatory bodies, industry groups, and legal experts in China will be essential to staying ahead of regulatory developments and demonstrating a commitment to local compliance.

• Scenario-Based Contingency Planning: Companies should develop comprehensive contingency plans addressing various potential scenarios, including asset freezes, transactional restrictions, and legal actions, ensuring robust business continuity and risk mitigation.

The enhanced Anti-Foreign Sanctions Regulations mark a definitive turning point for the operating landscape of foreign enterprises in China. Businesses that swiftly adapt and adopt proactive, informed strategies can mitigate risks effectively and position themselves to continue thriving within the complex regulatory environment.