China

On July 17, 2026, OFAC restructured Hong Kong-related sanctions following the lapse of the national emergency underlying Executive Order 13936, fully delisting nine officials including former Police Commissioner Stephen Lo and transferring others, including Chief Executive John Lee and former Chief Executive Carrie Lam, to a less restrictive sanctions list. Executive Order 13936 itself remains in force, statutory sanctions under the Hong Kong Human Rights and Democracy Act and Hong Kong Autonomy Act are unaffected, and Hong Kong does not regain its pre-2020 differential treatment for US export controls. The changes, linked to US-China trade negotiations following a May 2026 Trump-Xi meeting, reduce blocking obligations for financial institutions on some officials while preserving the legal infrastructure for future sanctions action.

Between April and June 2026, China's State Council enacted Decrees 834 and 835, establishing legal mechanisms to designate foreign measures as improper and impose administrative and criminal penalties on entities that comply with them. MOFCOM followed with its first two prohibition orders ever, one targeting U.S. OFAC sanctions on five Chinese refineries and one blocking an EU antitrust document request, confirming the regime is now operational. A third draft law under NPCSC review would additionally allow Chinese prosecutors to file civil damages suits against foreign organizations whose actions harm Chinese interests, creating bidirectional compliance conflicts for multinationals with no coordinated Western government guidance yet issued.

China's Loan Prime Rate is expected to remain unchanged on July 20, extending the longest hold since the LPR reform in 2019, as record-low bank net interest margins of 1.40% and the absence of Politburo authorization constrain any surprise cut. Q2 GDP growth of 4.3% missed forecasts and property investment fell 18% in H1, yet official signaling has emphasized incremental structural tools over rate adjustments. The late-July Politburo meeting remains the anticipated venue for any policy recalibration, making Monday's announcement primarily a confirmation of the status quo rather than a policy inflection point.