Abstract: As geopolitical tensions intensify, unilateral sanctions have become an important“strategic weapon”through which the United States (U.S.) exerts external economic coercion. As a third-party country and a key node in the continued deepening of global supply chains, whether China can stabilize global production networks constitutes critical evidence of its role in promoting the building of a community with a shared future for mankind. Using firm-level supply-chain relationships between sanctioned-country firms and Chinese listed companies from 2009 to 2023, this study finds that U.S. sanctions shocks significantly promote the formation of cross-border supply chains between sanctioned-country firms and Chinese firms, highlighting China’s important third-party role within the sanction’s regime. Mechanism analyses based on institutional coordination and market coordination indicate that U.S. sanctions induce sanctioned countries to deepen free trade agreements with China and to increase their trade dependence on China, thereby facilitating the establishment of cross-border supply chains between the two sides. The third-party effects of U.S. sanctions on cross-border supply chains are more pronounced when sanctions take the form of trade sanctions, when bilateral political relations between the sanctioned country and China are relatively weak, or when cultural distance is smaller. Further analysis shows that U.S. sanctions not only significantly strengthen the maintenance of existing supply-chain relationships between sanctioned-country firms and Chinese firms, but also foster the formation of new supply-chain ties. In addition, the structural power analysis indicates that the production power and knowledge power of sanctioned countries strengthen the third-party effects of U.S. sanctions on cross-border supply chains, whereas market power weakens this effect.

Key words: U.S. sanctions, cross-border supply chains, supply-chain relationships, third-party effects