Chinese Export Controls and Trade Sanctions

China’s export control regime was comprehensively reformed by the Export Control Law (Chukou Guanli Fa, 出口管制法), effective 1 December 2020. The Law establishes a unified framework for the control of dual-use items, military products, and other goods, technologies, and services that could affect national security and international obligations. China has also developed sanctions and countermeasures mechanisms, including the Unreliable Entity List.

Export Control Law

The Export Control Law replaced the previous fragmented regulatory framework, which consisted of multiple regulations administered by different agencies. The Law applies to: dual-use items and technologies; military products; nuclear, biological, and chemical weapons-related items; missiles and related technologies; and other items, technologies, and services related to national security.

The Law establishes the principle of end-use and end-user controls. Exporters must: obtain licenses for controlled items; conduct due diligence on end-users; report suspected violations; and maintain records of export transactions. The Law requires exporters to establish internal compliance programs (hegui tixi) and to designate responsible officers.

The Law applies extraterritorially. Exporters outside China who provide controlled items to end-users in China may be subject to Chinese export control jurisdiction where Chinese law is circumvented. Re-exports of controlled items from third countries may also be subject to Chinese controls.

Dual-Use Items

Dual-use items — goods, software, and technology that have both civilian and military applications — are subject to control under the Export Control Law and implementing regulations. The Ministry of Commerce (MOFCOM), in coordination with other agencies, maintains the Dual-Use Items Export Control List (Liangyong Wupin Chukou Guanli Qingdan), which specifies the items subject to control.

The Dual-Use Items List includes: advanced materials; electronics; computers; telecommunications and information security; sensors and lasers; navigation and avionics; marine systems; and aerospace and propulsion items. Items on the list require an export license from MOFCOM. License applications are evaluated based on: the nature of the item; the end-user; the end-use; the destination country; and the risk of diversion to military or terrorist purposes.

Military Products

Military products are controlled under separate regulations administered by the State Administration of Science, Technology, and Industry for National Defense (SASTIND). The Military Products Export Control List specifies items subject to control, including: weapons, ammunition, and military equipment; military electronics and communications equipment; military vehicles, vessels, and aircraft; and related technologies and technical data.

Military product exports require a license from SASTIND and approval from the Central Military Commission. License applications are evaluated based on: national security interests; foreign policy objectives; international obligations (including arms control agreements); and the risk of diversion to unauthorized end-users.

Sanctions and Countermeasures

China has developed a legal framework for economic sanctions and countermeasures. The Foreign Relations Law (2023) provides general authority for China to take countermeasures in response to acts that harm China’s sovereignty, security, or development interests. The Export Control Law authorizes the imposition of trade restrictions in response to discriminatory measures by foreign countries.

China has imposed sanctions against foreign entities and individuals under: the March 2021 sanctions on EU entities (in response to EU sanctions over Xinjiang); the July 2021 sanctions on US entities (in response to US sanctions on Chinese companies); the December 2021 sanctions on Canadian entities; and other measures targeting foreign individuals and organizations accused of interfering in China’s internal affairs.

Unreliable Entity List

The Unreliable Entity List (Bu Kekao Shiti Qingdan) was established by MOFCOM in September 2020. The List targets foreign entities that: engage in discriminatory measures against Chinese entities; disrupt normal market transactions; harm China’s national sovereignty, security, or development interests; or violate international economic and trade rules.

Entities on the List may be subject to: restrictions on import and export activities; restrictions on investment in China; restrictions on entry and residence; and other measures determined by MOFCOM. The List has been used sparingly, with only a few entities designated since its establishment. The List is part of China’s broader strategy to develop countermeasures against foreign economic coercion.

MOFCOM Enforcement

MOFCOM is the primary enforcer of export controls. MOFCOM: administers the export licensing system; conducts compliance inspections; investigates suspected violations; imposes administrative penalties; and coordinates with other enforcement agencies.

Penalties for export control violations include: warnings; fines (up to RMB 5 million for serious violations); suspension or revocation of export licenses; confiscation of illegal gains; and import-export prohibitions. Criminal liability applies for violations that severely harm national security or interests. MOFCOM has increased enforcement efforts, conducting targeted inspections of high-risk export transactions and imposing penalties for violations.

Rare Earths Export Restrictions

China’s export restrictions on rare earth elements have been a significant international trade issue. China holds a dominant position in rare earth production and processing, and export restrictions have raised concerns about supply security in importing countries. The Export Control Law provides legal authority for restricting rare earth exports on national security grounds.

In 2023, China imposed export controls on certain rare earth extraction and separation technologies under the Export Control Law. The controls target technologies used in the production of rare earth permanent magnets, which are critical inputs for electric vehicles, wind turbines, and military equipment. The restrictions have significant implications for global supply chains and have been the subject of disputes at the WTO.