China’s Ministry of Foreign Affairs (MOFA) on December 26, 2025, issued the country’s latest round of sanctions pursuant to its Anti-Foreign Sanctions Law (or AFSL),1 targeting US companies and US-based individuals engaged in the sale of military goods and technology to Taiwan.2 This announcement followed by one week the decision by the US Department of State to authorize major arms sales to Taiwan as authorized by the Taiwan Relations Act and implemented by the Defense Security Cooperation Agency.3
As in the past, the efficacy of such sanctions is likely to be largely symbolic and have little practical impact on either the named companies, whose defense-related business largely precludes them from doing business with China, or individuals who are unlikely to have any assets in or other attachments to China. The purpose instead is to express China’s displeasure over the participation of such companies and individuals over their sale and/or licensing of defense-related products to Taiwan, which impair China’s ability to pressure and ultimately integrate Taiwan into the People’s Republic of China.
This client alert provides an overview of China’s increasing use of its sanctions authorities as a component of its foreign and economic policy strategy; describes significant patterns in this most recent set of announcements; and looks ahead to potential US restrictions in 2026 that may introduce additional uncertainty in US-China trade relations.
China’s Sanctions Authorities: An Overview
Sanctions have become a much more prominent aspect of China’s trade policy strategy over the past several years—in some ways mirroring the various restricted party lists employed by the United States. China has created three lists since 2020, each of which has seen increasing use:
The Anti-Foreign Sanctions Law (administered by MOFA) directly targets and penalizes parties deemed by China to be involved in the drafting, approval or active facilitation of the implementation of restrictive measures, including sanctions issued by the United States or other nations, against China or Chinese parties.4 Countermeasures for use against listed parties include travel restrictions, seizure and/or freezing of assets or property within Chinese territory, and prohibitions on economic engagements. In this sense, the AFSL is similar to the US Office of Foreign Assets Control’s (OFAC) List of Specially Designated Nationals (SDN).
China has, to date, cautiously implemented the AFSL, largely confining designations to defense companies that do not engage in the marketing or sale of non-defense industry products to China, as well as to certain individuals and organizations involved in human rights advocacy that China’s government views as contrary to its interests. MOFA’s sanctions decisions imposed pursuant to the AFSL since its enactment are publicly available on MOFA’s website.5 Notwithstanding the heightened state of US-China tensions in 2025, China added only 39 parties to the Anti-Foreign Sanctions List last year (and suspended the enforcement of measures against five following the US-China Leaders’ Summit in Busan in October). By contrast, 113 entities were added in 2024, a major increase from the seven added in 2023 and the two added in 2022.
The Unreliable Entities List (UEL, administered by the Ministry of Commerce (MOFCOM)) targets parties deemed to have endangered China’s national development, sovereignty and/or development interests.6 Restrictive measures for listed parties include restrictions or prohibitions on China-related import, export, or investment activities, as well as travel restrictions and fines. Short of adding entities to the UEL, Chinese authorities have also initiated investigations into companies under consideration for addition to the list—investigations that can disrupt business operations and impose significant reputational costs on the parties involved.
As is the case with the AFSL, China has cautiously implemented the UEL and limited designations generally to defense companies that have participated in arms sales to Taiwan. Unlike with the AFSL, however, UEL designations are limited to entities (and not individuals), though individuals may still be affected by UEL designations to the extent that they are reliant upon work or residence permits from a UEL-designated entity.
Decisions to add entities to the UEL are published on MOFCOM’s website.7 Chinese authorities relied heavily on the UEL in 2025, adding 76 entities during the course of the year. By contrast, only three entities were added in 2024 and two in 2023.
The Export Control Controlled Party List (administered by MOFCOM) also is a relatively new legal instrument under Chinese law—the Export Control Law took effect on December 1, 2020,8 but its implementing regulations and list of controls did not become effective until December 1, 2024.9 Article 28 of the Export Control Regulations authorizes MOFCOM to designate importers or end users who are found to violate end-user or end-use requirements, endanger China’s national security, or use dual-use items for terrorist purposes. Designated importers or end users may be subject to prohibitions or restrictions on transacting in dual-use items, as well as “other necessary measures” as determined by MOFCOM. Exporters may apply for licenses to engage in transactions with designated parties. China’s export controls regime is not dissimilar to the United States’ own system, with the Controlled Party List functioning much like the Entity List administered by the Bureau of Industry and Security in the US Department of Commerce.
MOFCOM’s decisions to add entities to the UEL are published on the agency’s website.10 In 2025, China added 82 entities to its list of Controlled Parties.
New Sanctions: Smaller Companies, Specific Locations
While this round of sanctions, like previous rounds, is unlikely to have meaningful impact on the willingness of named companies or individuals to engage in defense-related business with Taiwan mediated through the United States under the Taiwan Relations Act following a determination by the State Department,11 there are some differences compared to previous rounds. There is a higher proportion in this round of smaller companies engaged in the development and production of innovative, often lower-cost weapons systems like unmanned aerial vehicles and unmanned underwater vehicles, which may be critical to the defense of Taiwan, e.g., drones,12 in contrast to previous rounds, in which large defense contractors manufacturing products like manned aircraft and missiles predominated.
One major difference in this round is the listing of “Boeing in St. Louis.” China since the inception of the AFSL regime has made a distinction between parent companies whose various subsidiaries produce needed civilian products and defense technologies sold to Taiwan, by refraining from listing the parent corporations. China in this round maintained the distinction in part by, e.g., listing Northrop Grumman Systems Corporation rather than its parent Northrop Grumman Corporation and by listing L3 Harris Maritime Services rather than its parent, L3 Harris Technologies.
The listing of “Boeing in St. Louis” constitutes a partial break from this pattern by listing Boeing. This avoids listing the full name of the parent corporation, i.e., the Boeing Company, but may capture personnel of the parent company or non-defense-related subsidiaries of the company who work full- or part-time for various reasons in St. Louis, where military aircraft production is centered. This may lead parent corporations to draw finer lines over the locations where corporate personnel work to minimize the effect of future Chinese sanctions.
As in the past, individuals were also listed in this round of sanctions.13 Here, too, China is extending the reach of its sanctions by listing John Cantillon’s affiliations with both L3 Harris Maritime Services and parent L3 Harris Technologies.
None of the listed individuals are likely to be directly affected unless they happen to have assets or other ties to China. Palmer Luckey personally dismissed his sanction as a “Christmas gift” from China.14 However, such sanctions may in the future impact executives who have such ties to China, especially Chinese-Americans.
Looking Ahead: Chinese Military Company and Biotechnology Designations
Despite the relative calm that has persisted in US-China trade talks since Presidents Trump and Xi met in South Korea in October 2025, new trade restrictions are set to come into effect in the coming weeks—potentially introducing uncertainty into the bilateral relationship.
First is the US Department of Defense’s (DoD) 1260H List, which comprises Chinese military companies identified by the secretary of defense. The list in the past has been updated early in the year, and must be updated on an annual basis. The most recent list was issued on January 7, 2025—so revisions are imminent.
In general, the 1260H List functions to “name and shame” the listed companies, although new restrictions related to eligibility for US government contracts will come into force over the next several years.15
Next is the Biosecure Act, which was passed as part of the most recent FY26 National Defense Authorization Act.16 As finalized, it will prohibit federal government agencies from contracting with or providing funding to certain Chinese “biotechnology companies of concern,” as well as US firms that use products or services produced or provided by such companies in the performance of the government contract. The final version also provides significant lead time for the development and issuance of implementing regulations before prohibitions come into effect—meaning that restrictions may not begin to come into effect until mid-2028.
The Biosecure Act has been under consideration since 2024,17 but changes have been made along the way. The final version no longer lists specific biotechnology companies of concern by name, including Wuxi AppTech (which was included by name in a prior version). Instead, the bill defines “biotechnology company of concern” by reference to a list to be developed by the Office of Management and Budget (OMB), based on suggestions from DoD and in consultation with other agencies (e.g., Health and Human Services, Homeland Security, State); this list will also include companies on the DoD’s 1260H List.
