Respecting American Law Might Mean Violating Chinese Law
Imagine you're a company operating in both the United States and China.
The U.S. government tells you:
“You are legally required to do this.”
You comply.
Then China says:
“You were not legally allowed to do that.”
Now you have a problem.
You followed the law in one country...
but potentially violated the law of another.
Welcome to one of the most complicated problems in international business:
Conflicting Laws.
How Can This Even Happen?
A multinational company doesn't operate under just one legal system.
Depending on its activities, it can be affected by:
U.S. law
Chinese law
EU law
Local regulations
Export controls
Sanctions
Data-protection rules
Foreign-investment rules
And sometimes these rules can point in completely different directions.
Imagine This Scenario
A U.S. company has operations in China.
The U.S. government imposes restrictions on doing business with a particular Chinese company.
The American company may be required to stop certain transactions.
But Chinese law can contain mechanisms designed to counter or block the effects of certain foreign sanctions or extraterritorial measures.
China's 2021 rules on blocking the improper extraterritorial application of foreign laws were specifically designed to address situations where foreign measures improperly restrict Chinese organizations or individuals from conducting normal business with third countries. (Export Control Information Network)
So the company can end up asking:
“Which law am I supposed to follow?”
And China Has Escalated Its Legal Response
This isn't just theoretical.
China has developed legal mechanisms to counter certain foreign sanctions and what it considers unlawful extraterritorial jurisdiction.
In April 2026, China issued new regulations specifically addressing foreign states' unlawful extraterritorial jurisdiction measures.
The rules allow Chinese authorities to take countermeasures and establish mechanisms targeting organizations or individuals involved in implementing certain foreign measures. (State Council of China)
China's Anti-Foreign Sanctions Law also gives authorities a framework for imposing countermeasures.
And those countermeasures can be serious.
For example, Chinese authorities have frozen assets and prohibited organizations and individuals in China from conducting transactions or cooperation with certain U.S. companies. (China Foreign Affairs Ministry)
So What Does a Company Do?
It can't simply say:
“We'll follow American law.”
Or:
“We'll follow Chinese law.”
International companies have to analyze the exact situation.
They may need to determine:
Which country has jurisdiction?
Where is the transaction occurring?
Where is the company incorporated?
Where are the assets located?
Where is the data stored?
Which subsidiary is involved?
Does an export-control rule apply?
Does a sanctions regime apply?
Does Chinese blocking or counter-sanctions law apply?
The answer can completely change the company's legal exposure.
This Creates a Strange Business Paradox
Imagine two governments effectively saying:
🇺🇸 “You must do this.”
🇨🇳 “You must not do this.”
The company can't make both governments happy.
And that's when international law becomes a business problem.
A decision that looks perfectly normal from New York can look completely different from Beijing.
It's Not Just About China and America
This phenomenon isn't unique to these two countries.
The European Union has its own mechanisms for responding to certain foreign extraterritorial laws.
Other countries have also developed laws intended to protect their companies from foreign measures.
The bigger trend is clear:
Governments increasingly use law as an economic and geopolitical tool.
And multinational companies are caught in the middle.
The Real Cost Isn't Always a Fine
If a company violates one country's requirements, the consequences might include:
Fines
Frozen assets
Restrictions on transactions
Loss of market access
Export restrictions
Regulatory investigations
Reputational damage
Potential criminal or civil liability
And in some circumstances, executives can personally become part of the problem.
That's why multinational companies now spend enormous amounts of money on compliance.
The Business Lesson
International expansion isn't simply:
“Open an office in another country.”
You're entering another legal environment.
The same action can have completely different consequences depending on where it happens.
A transaction that is legal in one jurisdiction may be restricted in another.
A government order that is mandatory in one country may be opposed by another.
And sometimes...
Following one law can put you in conflict with another.
MAACAT Perspective
Globalization made it possible for one company to operate across dozens of countries.
But globalization also created a new problem:
One company can have obligations to dozens of legal systems at the same time.
So before asking:
“Is this legal?”
a multinational company may need to ask something much harder:
“Legal where?”
