2 China Decrees Unleash Asset Freezes and Investment Curbs on Foreign Firms

For CFOs and fund managers, China’s latest legal moves add a layer of financial uncertainty. The two active decrees not only threaten supply chains but also enable asset freezes and investment restrictions, putting corporate balance sheets at risk. The draft law could further expose foreign firms to costly litigation.

China has significantly expanded its legal toolkit to retaliate against foreign sanctions and export controls, introducing two binding State Council decrees and a draft law over the span of four months in 2026. The rapid succession of measures—Decree No. 834 in March, Decree No. 835 in April, and a proposed expansion of the public interest litigation law announced in June—signals a strategic move by Beijing to push back against the extraterritorial application of US and EU sanctions. These new regulations expose multinational companies to the risk of severe penalties in China if they comply with Western sanctions that Beijing deems illegitimate, creating an unprecedented compliance dilemma. For firms operating globally, this is a direct escalation of the legal fragmentation that has characterized the US-China trade and technology battle, now with tangible, immediate consequences for ordinary commercial transactions.

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For CFOs and fund managers, China’s latest legal moves add a layer of financial uncertainty.

The core of China’s new anti-sanctions toolkit lies in the two decrees already in force. Decree No. 834, effective from March 2026, prohibits acts that “disrupt, undermine or discriminate against China’s industrial or supply chains.” This broad language could be interpreted to include compliance with US export controls on semiconductors or EU sanctions targeting specific Chinese entities. Decree No. 835, enacted in April, directly targets enforcement of sanctions with “improper extraterritorial jurisdiction,” allowing Chinese authorities to impose fines, revoke visas, freeze assets, restrict investments, and block imports or exports. These are not symbolic measures; they give the Chinese government a concrete enforcement mechanism that mirrors the sanctions tools used by the US Treasury and EU. The draft law, announced in June, goes a step further by introducing a prosecutorial mechanism that would allow Chinese public-interest litigation against foreign organizations and individuals whose actions harm China’s national interests or social public interest, potentially opening a new front in legal warfare.

James Hsiao, a Hong Kong partner at White & Case, highlighted the practical alarm among multinationals, noting that companies “have expressed some concern that these measures could affect ordinary commercial transactions, particularly where companies face potentially conflicting legal obligations.” A company that restricts dealings with a Chinese entity to comply with US sanctions could now face asset freezes in China under Decree 835, while non-compliance with US sanctions would trigger US penalties. The conflict is especially acute for sectors like technology, finance, and energy, where supply chains are deeply integrated and sanctions regimes overlap. This legal fork forces firms to choose which jurisdiction’s penalties they can better absorb, a calculus that may vary by industry and exposure.