The 2026 sanctions on China – update
The UK’s approach to China sanctions has shifted significantly over the past two years. Where the UK once confined its China-related sanctions to a handful of entities linked to human rights abuses or cyber threats, it now regularly designates Chinese companies under the Russia sanctions regime for facilitating circumvention of export controls and supplying restricted goods. This represents a form of secondary-style sanctions: measures directed at third-country entities whose activities support a primary sanctions target.
This approach sits within the Government’s broader “Protect-Align-Engage” framework for managing the UK-China relationship, articulated in the 2023 Integrated Review Refresh. That framework acknowledges China’s economic importance while committing to robust action against threats to national security. The February 2026 sanctions package is the clearest expression yet of how the “Protect” pillar operates in practice. The UK Government sanctioned 240 entities, seven individuals, and 50 ships on 24 February 2026, the fourth anniversary of Russia’s full-scale invasion of Ukraine. Among the designated entities were Chinese companies, including Xiefeng (HK) International Electronics, Yibin Vector Electronic Technology, Beijing Xichao International Technology, and Shandong Future Robot, each accused of supplying goods or technology to Russia’s defence sector.
Sanctions framework and primary legislation
The Sanctions and Anti-Money Laundering Act 2018 (SAMLA) provides the statutory basis for UK sanctions regimes. It empowers ministers to make, amend, and revoke sanctions regulations by statutory instrument. The principal instrument relevant to China-related designations is the Russia (Sanctions) (EU Exit) Regulations 2019, as amended.
A critical development came with the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2024, which came into force on 31 July 2024. These regulations materially broadened the criteria for designation. New regulation 6(4)(f) allows the Secretary of State to designate any person “providing financial services, or making available funds, economic resources, goods or technology” to a person already falling within the existing designation criteria. This expansion enabled the UK to designate foreign entities, including Chinese companies acting as supply chain intermediaries, without establishing a direct connection to the Russian state. It also captured those engaged in circumvention or facilitation of sanctions breaches, even where their activities took place entirely outside UK territory.
Since 28 January 2026, the UK Sanctions List maintained by the Foreign, Commonwealth and Development Office (FCDO) is the sole official source for designations. The former OFSI Consolidated List of Asset Freeze Targets has been retired. Businesses must ensure their screening systems draw exclusively from the UK Sanctions List.
Secondary sanctions on China
The UK designates Chinese entities through asset freezes under the Russia sanctions regime. The mechanism operates by identifying companies acting as circumvention hubs for restricted goods, particularly dual-use electronics, machine tools, microprocessors, and components used in weapons systems.
The trajectory of designations over 2025 and 2026 illustrates the acceleration. In February 2025, the UK designated eleven Chinese entities as part of its largest sanctions package at that time, including ACE Electronic (HK) Co Ltd, GSK CNC Equipment Co Ltd, and Poly Technologies Inc, for supplying machine tools, microelectronics, and dual-use technology to Russia’s defence sector. In December 2025, a separate set of cyber-related designations targeted Sichuan Anxun Information Technology Co Ltd (known as i-Soon) and Integrity Technology Group for carrying out indiscriminate cyberattacks against government and private-sector IT systems worldwide.
Then came the February 2026 package, which added a further tranche of Chinese companies to the UK Sanctions List for their roles in supplying the Russian military-industrial complex.
Beijing’s response has been consistent and sharp. The Chinese Ministry of Commerce stated in March 2026 that the UK has “repeatedly imposed sanctions on Chinese companies under the pretext of Russia-related issues” and described them as “unilateral sanctions that lack a basis in international law.” It warned that China would “take necessary measures to safeguard its business interests.” The Chinese Embassy in London issued similar protests in October and December 2025.
Enforcement and regulatory bodies
Two principal bodies enforce UK sanctions: OFSI and OTSI.
The Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, is responsible for implementing and enforcing financial sanctions in a civil capacity. It has the power to impose civil monetary penalties of up to the greater of £1,000,000 or 50 per cent of the estimated value of the breach. In January 2026, OFSI published a penalty notice imposing a £160,000 fine on Bank of Scotland for breaching regulations 11 and 12 of the Russia (Sanctions) (EU Exit) Regulations 2019 by processing 24 transactions for an account belonging to a designated person. The bank benefited from a 50 per cent discount for voluntary disclosure.
The new discount structure introduced by the Office of Financial Sanctions Implementation (OFSI) in February 2026 significantly reforms the calculation of civil monetary penalties. While the headline discount for voluntary disclosure has been reduced, the new framework allows for cumulative discounts that can reduce a baseline penalty by up to 70 per cent.
The Office of Trade Sanctions Implementation (OTSI), part of the Department for Business and Trade (DBT), became operational in October 2024 and is responsible for the civil enforcement of trade sanctions. OTSI works in parallel with HMRC, which retains responsibility for criminal enforcement of trade sanctions and for export controls relating to physical exports and imports. OTSI’s regulatory reach extends beyond UK borders to UK businesses and traders operating abroad.
Critically, the UK’s sanctions enforcement regime operates on a strict liability basis. Civil penalties can be imposed without requiring proof that the business knew, or had reasonable cause to suspect, that it was in breach of sanctions. This applies to both OFSI and OTSI enforcement.
Case law and legal precedents
Two recent legal developments are particularly relevant to businesses assessing their sanctions exposure.
In Fridman v Agrofirma Oniks LLC EWCA Civ 139, the Court of Appeal held that the English courts lack personal jurisdiction over a sanctioned person who is indefinitely barred from entering the UK. Mr Fridman, designated under the Russia Regulations in March 2022, had his leave to remain cancelled, and the Court found that his absence from the jurisdiction could not be regarded as “temporary.” The claimants would need to apply for permission to serve proceedings out of the jurisdiction. This ruling has practical consequences for anyone seeking to bring claims against sanctioned individuals formerly resident in England.
On damages for wrongful designation, the Economic Crime (Transparency and Enforcement) Act 2022 amended SAMLA to cap damages in designation challenge proceedings. The Sanctions (Damages Cap) Regulations 2022 set the cap at £10,000, and damages are only available where the claimant proves that the designation was made in bad faith. The cap may be disapplied where necessary to protect the individual’s Convention rights, but the threshold remains deliberately high. This significantly limits the Government’s financial exposure to claims arising from designation decisions.
How can UK businesses ensure compliance?
Having spent many years advising clients on sanctions law, it is clear to me that sanctions compliance in 2026 demands more than periodic screening against the UK Sanctions List. Businesses with any exposure to Chinese counterparties, supply chains, or intermediaries should consider the following measures:
- Conduct enhanced due diligence (EDD) on ownership and control structures. OFSI’s February 2026 call for evidence highlights that assessing whether a designated person exercises, or could exercise, control over an entity remains one of the most challenging areas for compliance teams. Firms should not rely solely on corporate registry data but should investigate the full chain of beneficial ownership.
- Map supply chains to identify opaque intermediaries in third countries or overseas territories that may be routing goods or technology to China and onward to Russia. OTSI’s guidance on circumvention red flags provides a useful starting point for freight, shipping, and manufacturing businesses.
- Report suspected breaches to OFSI or OTSI “as soon as practicable.” For firms subject to mandatory reporting obligations, prompt disclosure carries material benefits: Bank of Scotland’s penalty was reduced by 50 per cent because it self-reported promptly.
- Monitor the UK Sanctions List in real time. With designations issued at irregular intervals and sometimes with little advance notice, businesses cannot rely on monthly or quarterly screening cycles. Automated screening tools that draw directly from the FCDO’s UK Sanctions List are essential.
- Train staff at all levels to recognise sanctions risk indicators, particularly those working in procurement, trade finance, payments, and export compliance. The strict liability standard means that a lack of awareness is not a defence.
Wrapping up
The UK’s willingness to designate Chinese entities under the Russia sanctions regime shows no sign of slowing. Designation volumes have increased markedly in each successive package, enforcement infrastructure through OFSI and OTSI is maturing, and the regulatory focus on ownership and control is intensifying. Businesses that trade with Chinese counterparties, source components from Chinese suppliers, or operate in sectors with complex international supply chains face a higher compliance burden than at any point since SAMLA came into force.
My clients who have developed the most effective response view their compliance programme relating to sanctions risks as dynamic rather than static. They monitor the UK Sanctions List continuously, apply robust due diligence to ownership structures, and adapt swiftly to new designations.
If you have a business with significant China exposure, taking specialist legal advice is the best way to ensure your commercial decisions remain lawful under an ever-expanding sanctions regime.
Frequently asked questions
Has the UK imposed direct sanctions on China as a country?
No, the UK has not imposed a country-wide sanctions regime against China. The designations of Chinese entities have been made under the Russia sanctions regime (and, separately, the cyber sanctions regime). They target specific companies and individuals identified as facilitating Russia’s war effort or conducting hostile cyber operations, rather than Chinese commerce as a whole.
Can a UK business be penalised for a sanctions breach it did not know about?
Yes, the UK’s sanctions enforcement regime operates on a strict liability basis. OFSI and OTSI can impose civil monetary penalties without establishing that the business knew or had reasonable cause to suspect that a breach had occurred. This makes robust screening and due diligence essential for all UK businesses.
What is the UK Sanctions List and how has it changed?
Since 28 January 2026, the UK Sanctions List maintained by the FCDO is the sole official source for UK sanctions designations. It replaced the previous dual-list system, which included the OFSI Consolidated List of Asset Freeze Targets. Businesses must ensure that their compliance systems now draw exclusively from the UK Sanctions List.
What should a business do if it suspects a sanctions breach?
Report the suspected breach to OFSI (for financial sanctions) or OTSI (for trade sanctions) as soon as practicable. Prompt voluntary disclosure can result in a significant reduction in any penalty. Bank of Scotland received a 50 per cent discount on its penalty for self-reporting. Businesses should also seek specialist legal advice before taking any further steps in connection with the relevant transaction.
How has China responded to UK sanctions on Chinese companies?
China has consistently condemned the designations. The Chinese Ministry of Commerce described them in March 2026 as “unilateral sanctions that lack a basis in international law” and warned that China would “take necessary measures to safeguard its business interests.” China’s Anti-Foreign Sanctions Law of the People’s Republic of China also provides a legal framework for retaliatory measures against foreign sanctions. However, China has so far confined its response to diplomatic protests.
To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.
This article does not constitute legal advice. For further information, please contact our London office.
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