Extract
In response to President Xi Jinping’s call to accelerate its country’s law-based governance beyond its borders, China has in recent years constructed a growing suite of legal instruments with extraterritorial effect.1 Although these measures serve multiple purposes—including facilitating China’s global expansion and protecting its overseas interests—one of their central functions is to counter U.S. sanctions and trade restrictions.2 China’s weaponization of extraterritorial law, shaped by intensifying U.S.-China rivalry, thus represents a distinct and emerging form of extraterritoriality. It differs from the traditional expansion of extraterritorial jurisdiction, which has often operated as a form of legal imperialism in service of a broader neocolonial project.3
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In response to President Xi Jinping’s call to accelerate its country’s law-based governance beyond its borders, China has in recent years constructed a growing suite of legal instruments with extraterritorial effect.Footnote 1 Although these measures serve multiple purposes—including facilitating China’s global expansion and protecting its overseas interests—one of their central functions is to counter U.S. sanctions and trade restrictions.Footnote 2 China’s weaponization of extraterritorial law, shaped by intensifying U.S.-China rivalry, thus represents a distinct and emerging form of extraterritoriality. It differs from the traditional expansion of extraterritorial jurisdiction, which has often operated as a form of legal imperialism in service of a broader neocolonial project.Footnote 3
Since 2018, Washington has aggressively deployed extraterritorial sanctions and related restrictions against Chinese firms and individuals. Yet for much of this period, Beijing refrained from invoking its most potent retaliatory tools—such as sweeping restrictions on rare-earth exports with extraterritorial consequences—until very recently. This essay argues that China’s initial restraint, often read as a sign of relative weakness vis-à-vis the United States, has instead become a source of strategic leverage. By delaying the deployment of its legal arsenal while consolidating industrial capacity and strengthening institutional support, Beijing preserved escalation options until structural conditions shifted more decisively in its favor.
China’s Extraterritorial Use of Its Law
China’s reckoning with the reach of U.S. regulation came into sharp focus during the 2017–2018 Sino-U.S. trade confrontation. Two episodes were particularly revealing. In 2017, the U.S. Department of Commerce imposed a roughly $1.1 billion civil penalty on ZTE Corporation, a state-owned telecommunications company, for sanctions violations and related compliance failures.Footnote 4 When ZTE later fell short of agreed remedial measures, the reimposition of U.S. export restrictions in 2018 effectively cut off access to critical U.S.-origin components, forcing the company to suspend core operations.Footnote 5 The arrest of Huawei’s chief financial officer Meng Wanzhou in Vancouver in December 2018, pursuant to a U.S. extradition request alleging bank fraud related to Iran sanctions evasion, conveyed a similar lesson.Footnote 6 Together, these incidents made clear to Beijing that U.S. extraterritorial enforcement—through secondary sanctions, export bans, and criminal prosecution—could disrupt global supply chains and, in particular, threaten the survival of leading Chinese tech firms.
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