China is sharpening its arsenal of defenses against foreign regulations—and in doing so, is striking at the very heart of global compliance strategies. The new regulations on supply chain security and “unlawful extraterritorial jurisdiction” draw a clear red line: Anyone operating with or in China who also complies with U.S., U.K., or EU sanctions, export control, or supply chain laws will find themselves in a genuine conflict zone between these legal systems in the future.
On one side are OFAC lists, UFLPA audits, CSDDD due diligence, and discovery obligations; on the other, Beijing’s message: Measures that “inappropriately” impair Chinese sovereignty, security, or supply chains may be classified as impermissible extraterritorial application of foreign law and met with countermeasures—ranging from entry, trade, data, and investment restrictions to personal risks for management or even restrictions on family members.
In practical terms, this means: Strict compliance in the West—such as terminating a deal due to U.S. outbound investment rules or halting shipments to a Chinese business partner subject to sanctions—can be interpreted in China as discriminatory market exclusion or a threat to supply security, potentially triggering investigations or inclusion on a Malicious Entity List.
What does this mean for your company? Now is the time for a reality check: systematically align your own sanctions, export control, and supply chain programs with the new Chinese requirements; rethink governance structures; never make decisions from a single perspective; establish escalation and exception processes for critical decision-making pathways; and sharpen communication channels—both internally and externally.
This text was translated using AI.
