Beijing has armed itself with a new set of legal weapons designed to hit back at American economic pressure, issuing two State Council decrees that give Chinese authorities sweeping power to blacklist foreign companies, restrict trade, and fortify domestic supply chains against disruption.
The regulations, Decree No. 835 and Decree No. 834, were published in early 2026 and formalize retaliatory mechanisms that go well beyond anything China had on the books before. Combined with the Unreliable Entity List system created in 2020, the three instruments form a layered enforcement architecture that legal analysts say is purpose-built to counter U.S. sanctions, export controls, and the broader economic decoupling campaign that has intensified since Washington tightened semiconductor restrictions in late 2024 and early 2025.
For multinational companies operating in both countries, the practical result is a tightening vise: comply with American sanctions and risk punishment from Beijing, or accommodate Chinese demands and risk violating U.S. law.
What the new decrees actually do
Decree No. 835, formally titled the Regulations on Countering Unlawful Extraterritorial Jurisdiction by Foreign Countries, targets the enforcement of foreign sanctions themselves. The full text, available as an official PDF from China’s Ministry of Justice, creates a “malicious entity list” that can be used against foreign companies, organizations, or individuals involved in carrying out sanctions that Beijing considers illegitimate.
The decree is designed to reach upstream into the compliance machinery of banks, technology suppliers, logistics providers, and other intermediaries that might otherwise treat U.S. or allied sanctions as mandatory. By threatening to list these firms as malicious entities, Beijing is effectively telling foreign companies: enforcing someone else’s sanctions on Chinese soil carries consequences.
Decree No. 834 takes a different approach. Framed around national security, it establishes a supply-chain defense regime that grants regulators the authority to conduct risk assessments of critical industrial chains, mandate resilience measures, and take countermeasures when foreign actions threaten Chinese access to essential inputs. The regulation draws on coordination across multiple ministries, with references linking to the Ministry of National Defense, the Ministry of Education, the Ministry of Science and Technology, the Ministry of Foreign Affairs, and the National Development and Reform Commission.
Where Decree No. 835 is reactive, punishing those who enforce foreign restrictions, Decree No. 834 is proactive. It gives Beijing standing to intervene before supply-chain disruptions materialize, authorizing risk mapping of key sectors, contingency planning, and measures to secure critical materials and components.
The Unreliable Entity List remains the enforcement backbone
Both new decrees build on an existing tool: the Unreliable Entity List, created under MOFCOM Order No. 4 of 2020. Administered by China’s Ministry of Commerce, the system grants investigation powers, defines listing criteria, and specifies penalties including import and export restrictions, entry bans, work permit revocations, fines, and what the order describes as “other necessary measures.”
The list was widely understood as Beijing’s direct answer to the U.S. Entity List maintained by the Commerce Department’s Bureau of Industry and Security. Since its creation, it has been used sparingly. Notable designations have included U.S. defense contractors Lockheed Martin and Raytheon, as well as apparel company PVH Corp., the parent of Calvin Klein and Tommy Hilfiger. But the small number of listings has not diminished the list’s deterrent effect; the mere possibility of designation has shaped compliance calculations at firms across the technology, finance, and manufacturing sectors.
Taken together, the three instruments create a system where Beijing can blacklist foreign actors under multiple legal theories, restrict their commercial access to the Chinese market, and simultaneously harden domestic supply chains against fallout. Decree No. 835 offers a legal hook to punish entities that comply with foreign restrictions. Decree No. 834 provides tools to reduce China’s vulnerability to those same restrictions. And the Unreliable Entity List gives the Ministry of Commerce a standing mechanism to enforce trade and investment penalties on a case-by-case basis.
Critical questions that remain unanswered
Despite the breadth of the new regulations, several important details are missing from the published texts.
No public record confirms which specific entities, if any, have been added to the malicious entity list created under Decree No. 835. The regulation establishes the mechanism, but the initial roster and the pace of future designations have not been disclosed. Whether U.S. technology firms, defense contractors, or financial institutions will be early targets remains a matter of speculation.
Implementation timelines for Decree No. 834’s supply-chain security regime are also unclear. The regulation grants broad authorities for risk prevention and countermeasures, but the text does not specify when compliance obligations take effect for particular industries or whether phased rollouts are planned. Companies operating in sectors like semiconductors, rare earths, or advanced manufacturing cannot yet determine their specific exposure. It is also uncertain how the decree will interact with existing rules on cybersecurity, data security, and export controls, which already impose overlapping requirements on many of the same firms.
The degree of inter-ministerial coordination is another open question. Decree No. 834 references multiple agencies, but none have issued public statements clarifying their enforcement roles. A tightly coordinated model could produce rapid, high-impact responses to foreign measures. A looser arrangement might result in slower, more uneven application.
There is also uncertainty about how far the concept of “national security” will stretch in practice. The statutory language in Decree No. 834 is broad, and past Chinese legislation has applied security-based rationales to areas ranging from personal data to academic exchanges. Without implementing rules or test cases, it is difficult for companies to know whether routine commercial disputes or supply hiccups could be reinterpreted as security risks, triggering investigations or mandatory restructuring.
Deterrence or offense: the strategic ambiguity is deliberate
Competing interpretations exist about what Beijing ultimately intends. One reading holds that the decrees are primarily defensive, designed to deter further U.S. export controls by raising the cost of compliance for multinational firms. Under this view, the threat of being listed as a malicious or unreliable entity is meant to make foreign companies lobby their own governments to moderate sanctions.
An alternative reading suggests the regulations are offensive tools meant to create asymmetric pressure, allowing China to selectively punish foreign companies while shielding its own industrial base from retaliation. The legal texts support both interpretations, and no official commentary has resolved the ambiguity. The absence of policy speeches or white papers tying the decrees to a stated doctrine leaves analysts inferring strategy from structure rather than from explicit statements.
That ambiguity may itself be the point. By keeping the criteria for designation vague and the enforcement timeline open-ended, Beijing preserves maximum flexibility. Companies cannot easily calculate their risk, which means the regulations exert a chilling effect even before a single new entity is listed.
What companies and compliance teams should watch
Until test cases emerge, risk assessments will necessarily rest on scenario analysis rather than empirical enforcement patterns. Legal and compliance teams at multinational firms will need to monitor official gazettes, ministry announcements, and subsequent implementing rules for signs of how the system is being activated.
The regulatory architecture is now in place. The gap between legal authority and actual enforcement is the central uncertainty, and it is a gap that could close quickly. A regulation that exists mostly on paper can still reshape corporate behavior through the threat of action alone, but its real-world impact will ultimately depend on how often and how visibly Beijing chooses to use it.
For now, the safest assumption for any company with significant exposure to both the U.S. and Chinese markets is that the cost of straddling both systems just went up.
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*This article was researched with the help of AI, with human editors creating the final content.
