Inside China's New Counter-Sanctions Regime: Orders 834 and 835

China's State Council recently issued two orders that change the rules around how foreign companies can investigate their supply chains inside China, and how far they can go in enforcing Western sanctions against Chinese counterparties.

State Council Order No. 834 (the Provisions on Industrial and Supply Chain Security, effective April 7, 2026) elevates Chinese regulatory scrutiny on supplier due diligence, audits, and other in-country information gathering. State Council Order No. 835 (the Provisions on Countering Foreign Unlawful Extraterritorial Jurisdiction, effective April 13, 2026) creates a Malicious Entity List and a civil cause of action for Chinese parties harmed by foreign extraterritorial measures (e.g. China sanctions). Neither order changes what Western regulators expect from companies sourcing in China. However, they make on-the-ground due diligence riskier and registry-based visibility more valuable.

What China's New Counter-Sanctions Orders Do

Order No. 834 (Industrial and Supply Chain Security)

Article 13 of Order 834 brings supply chain information gathering inside China (e.g. audits, supplier surveys, on-site investigations) under existing Chinese data and national security law authority. Article 15 authorizes countermeasures against foreign actors (including foreign companies) whose conduct is perceived as acting against Chinese suppliers. This impacts any foreign companies running on-the-ground supply chain due diligence within China.

Order No. 835 (Countering Foreign Unlawful Extraterritorial Jurisdiction)

Order 835 creates a Malicious Entity List, a Prohibition Execution Order mechanism, and a civil cause of action for Chinese parties harmed by parties implementing foreign extraterritorial measures. This impacts companies whose sanctions, export controls, or forced-labor compliance negatively affects Chinese counterparties.

Order 834 doesn't ban legitimate supplier due diligence outright, but Article 13 does prohibit foreign entities from conducting unauthorized supply-chain investigations or information-gathering inside China — and it pulls that activity squarely into China's data- and national-security framework. The line between approved diligence and prohibited information-gathering is where the risk now sits.

That line is beginning to take shape: in late June 2026, MOFCOM issued implementing measures (the Measures for Industrial and Supply Chain Security Investigations) naming itself as the sole investigator and detailing how supply-chain-security investigations will be initiated and conducted — including document inspection, questionnaires, and on-site investigations. Expect the contours of permitted versus prohibited information-gathering to keep sharpening as these measures are applied.

Order 835 is more concrete, targeting entity listings, prohibition orders, and civil claims aimed at parties implementing Western sanctions or export controls against Chinese entities. China has already begun using this framework, even though no company has been added to the Malicious Entity List yet. On May 15, 2026, the Ministry of Justice (with the Ministry of Commerce) issued its first formal determination under Order 835, finding that the European Commission's investigation of Nuctech under the EU Foreign Subsidies Regulation was an improper extraterritorial measure and directing Chinese parties not to assist it. Days earlier, on May 2, 2026, the Ministry of Commerce issued a blocking order barring Chinese parties from complying with U.S. sanctions on five Chinese companies tied to Iranian oil trade. Both actions targeted foreign governments and their measures, not private companies, but they show how quickly Beijing is willing to act.

What Changes for Your Sanctions and Visibility Work

For most private companies with China counterparty exposure, the immediate compliance risk is indirect. These Orders primarily target on-the-ground activities within China, and have limited ability to reach activities outside China. The same logic applies to data providers operating outside China based on public and official sources, which you're unlikely to face disruptions for the registry, ownership, and trade data your teams already rely on. If you do have China operations, or if your diligence program leans on in-country supplier visits, surveys, or third-party investigators in China, the risk profile of that work has changed and you should review it with PRC counsel.

The retaliation framework introduces a separate risk worth tracking. Order 835 creates an inverse exposure: the more your compliance program “implements” Western sanctions, export controls, or forced-labor measures on Chinese counterparties, the more likely a supplier you flag or exit becomes a basis for Chinese countermeasures, including Malicious Entity List designation. That said, the first enforcement actions have targeted foreign governments and regulators, not private companies, and the practical reach against companies with no PRC presence remains limited. The Nuctech determination is the clearest signal so far. It shows these tools being used to block a foreign regulator's demand for documents and data held in China, which is exactly the kind of in-country information gathering that now carries more risk.

Where to Focus

• Reassess your in-country diligence playbook. If your China program relies on supplier visits, on-site audits, or in-country questionnaires, that approach now merits re-evaluation. Talk to local counsel about what your program can still do legally and whether more of the diligence load should shift to data sources located outside China.
• Surface state-owned entity exposure in your chain. Order 835 creates real risk for companies whose suppliers have Chinese state ownership or defense-sector ties. Knowing where state-owned entity links sit in your supply chain is the foundation for assessing retaliation risk and for identifying which suppliers may be subject to direct government direction.
• Lean into registry-based data visibility for everything else. Chinese corporate registrations, beneficial ownership disclosures, customs records, and court filings are not restricted by these Orders and still tell you what you need to know about ownership, jurisdiction, and risk exposure. They don't require anyone to set foot in China, and they sit outside the activities Order 834 is primarily targeting.

The Takeaway from China's New Counter-Sanctions

You still need to know who is in your supply chain, who owns them, and where their exposure to sanctions, forced labor, or state direction sits. Public and official records visibility was already the most reliable source to rely on. It is now more important than ever to have access to this data so that you do not need to rely on in-country diligence within China.

This blog is for informational purposes and isn't intended to be legal advice. For customers operating in or sourcing from China, we encourage you to work with your own counsel to understand your specific exposure under Orders 834 and 835.