In 2022 a container ship named Dortmund Express left a Chinese port for the United States. On board were three containers of electronics made by Hikvision, a company on the American entity list. The operator, Ocean Network Express, declined to deliver them. That was prudent under American law. Hikvision sued in the Shanghai Maritime Court under China’s Anti-Foreign Sanctions Law of 2021. The court found the refusal “discriminatory” and ordered the carrier to pay Rmb 4.99 million with interest. In June 2026 the Supreme People’s Court praised the judgment and said it should “inject momentum” into similar cases.
That single ship carries the whole story. A rule written in Washington and a rule written in Beijing now reach the same deck at the same time, and both are enforced.
Extraterritorial law is not a Chinese invention. The United States has practised it for a century. The Trading with the Enemy Act of 1917 and the International Emergency Economic Powers Act of 1977 gave the executive power to freeze assets and forbid transactions with foreigners whom no American court would otherwise see. The Foreign Corrupt Practices Act of 1977 punished bribes paid abroad by companies with only a listing in New York. The Helms-Burton Act of 1996 allowed suits in American courts against any foreign firm that “trafficked” in property Cuba had nationalised.
In 2014 BNP Paribas, a French bank, pleaded guilty and paid 8.9 billion dollars because dollar payments touching Sudan and Iran had cleared through New York. In 2013 an Alstom executive, Frederic Pierucci, was arrested at Kennedy airport under the FCPA for conduct in Indonesia. He wrote a book about it, and the title was The American Trap.
Europe complained, and then copied. The European Union’s Regulation 2271/96, the blocking statute, forbade European firms from complying with Helms-Burton and let them recover damages in European courts. It was rarely used. The lesson everyone drew was simple. Extraterritorial law works when the writer controls something the world cannot do without. America controlled the dollar and the payments system. Europe controlled neither and its statute stayed on paper.
China has learned the lesson and has spent six years building the same toolkit, in the same order. The Unreliable Entity List came on September 19, 2020 under Commerce Ministry Order No. 4. The Blocking Rules against “unjustified extraterritorial application of foreign legislation” came on January 9, 2021 under Order No. 1. That is the European statute of 1996, with Chinese characteristics.
The Anti-Foreign Sanctions Law came on June 10, 2021 and gave private parties, like Hikvision, a right to sue. The Foreign Relations Law of 2023 wrote “foreignrelated rule of law” into the constitutional architecture.
Then, this April, came the pair of State Council decrees. Decree 834 of April 7, 2026 on industrial and supply chain security restricts foreign “investigations and information collection” in Chinese supply chains. Shorn of jargon, it makes a factory audit a security matter. Decree 835 of April 13, 2026 asserts jurisdiction over any conduct with an “appropriate connection” to China, creates a Malicious Entity List, pierces through to affiliates, and allows criminal liability. Both took effect on the day they were signed. Neither offered a grace period.
Then a fifth one, Decree 837, dictates whom Chinese companies may sell overseas assets to, a direct reply to the pressure on CK Hutchison over its Panama ports.
Why now? The proximate cause is frustration. American export controls on semiconductors since October 2022, the entity list, the forced labour blacklist, the refiners sanctioned for buying Iranian oil. The State Council said as much when Premier Li Qiang signed the April decrees, condemning “unilateral sanctions and long-arm jurisdiction”.
But frustration alone does not produce enforceable law. Iran is frustrated. Venezuela is frustrated. Their courts issue judgments nobody reads.
What made China capable is the thing it controls. China produces about 30 per cent of global manufacturing value added, by UNIDO’s count. It processes roughly 90 per cent of the world’s rare earths. It is the largest trading partner of more than 120 countries. A Japanese carrier, a German chemicals firm, an Indian pharmaceutical company cannot leave.
Beijing has also built the institutional plumbing the Europeans never bothered with. A specialised maritime court, a Supreme People’s Court willing to signal doctrine, and, for Chinese firms that hesitate, the Central Commission for Discipline Inspection. The dollar gave Washington its stick. The supply chain gives Beijing its own.
The implication for the world is a two-master problem. A firm is now expected to comply with a sanction and to be punished for complying with it. Lawyers in Singapore report a surge in such work. The rational responses are all costly. Split the company into a China business and a rest-of-world business. Route through a neutral jurisdiction. Stop doing due diligence and accept the reputational risk instead.
Every one of these raises the price of trade and none of them is visible in a tariff schedule.
For the United States the implication is uncomfortable. Its own tools are being turned around, clause for clause, and the Dortmund Express judgment does to a shipping line what New York did to BNP Paribas. Sanctions were cheap for Washington when they were unanswered. They will be dearer when American firms in China face exit bans for obeying their own government.
A one year trade truce, however it is extended, does not resolve this. It merely defers the next ship.
For India the implication is quieter and closer. About 70 per cent of our bulk drug intermediates come from China, by the Department of Pharmaceuticals’ own estimate. Our electronics assembly runs on Chinese components. Press Note 3 of 2020 required prior government approval for every investment from a country sharing a land border. In March 2026 the Union Cabinet relaxed it, allowing noncontrolling stakes below 10 per cent through the automatic route and promising a 60 day clock for proposals in electronics, capital goods and solar inputs, with semiconductors still needing approval and a Committee of Secretaries deciding the list.
What survives is a regime that treats Chinese capital differently by design, and Beijing may now read exactly that as “discriminatory treatment” under Decree 835. Indian refiners buying Russian crude already sit between American secondary sanctions and Indian policy.
Add the Chinese layer and a Mumbai compliance officer answers to three capitals. India has no blocking statute of its own, no equivalent of Order No. 1 or Regulation 2271/96, and no doctrine on when a foreign judgment against an Indian firm for obeying Indian law will be recognised. That is a gap the Law Commission could usefully fill before a Shanghai court fills it for us.
Tacitus wrote that the more corrupt the state, the more numerous the laws. He might have added that the more powerful the state, the further its laws travel. For a century the direction of travel was westward to eastward. The ship has turned around.
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Aditya Sinha writes on macroeconomics and geopolitics. Shaurya Pandey is a Technology & Finance Strategy Consultant.
