On 26 October 2026, China’s Ministry of Commerce (MOFCOM) released the Draft Special Provisions on the Protection of Chinese Trade Secrets (the ‘Draft Provisions’) for public comment. The Draft Provisions seek to establish a special regulatory mechanism to address trade secret infringements committed by foreign entities.
The significance of the Draft Provisions lies in their proposed approach to trade secret protection. In addition to protecting the legitimate rights and interests of trade secret owners, the Draft Provisions expressly address conduct affecting China’s national sovereignty, security and development interests. They would also authorize MOFCOM to impose measures affecting international trade, investment and the entry and residence of relevant personnel.
If adopted, the Draft Provisions could have implications beyond the civil, administrative and criminal liabilities traditionally associated with trade secret infringement. In certain circumstances, the conduct of a foreign entity could also give rise to regulatory measures affecting its business operations in China. Multinational companies operating in China or doing business with China should therefore consider the proposed regime in the context of their trade secret protection, cross-border technology arrangements and broader compliance programs.
1. How Would the Draft Provisions Differ from China’s Existing Trade Secret Protection Framework?
China already has an established legal framework for trade secret protection, principally under the Anti-Unfair Competition Law, together with relevant civil and criminal laws. Trade secret owners may seek civil remedies, report suspected infringements to the competent administrative authorities or, where the relevant statutory requirements are met, pursue protection through criminal enforcement.
The Draft Provisions would introduce a different regulatory dimension. Rather than merely providing an additional remedy for trade secret owners, they contemplate specific measures against foreign entities whose conduct satisfies the prescribed conditions.
Under Article 2, two elements must be present for the Draft Provisions to apply. First, a foreign entity must have engaged in conduct infringing Chinese trade secrets during international economic and trade activities or related activities. Second, such conduct must either harm China’s national sovereignty, security or development interests, or pose an actual threat to those interests.
A trade secret infringement involving a foreign company would not necessarily, by itself, trigger the proposed measures. The additional requirement concerning China’s national interests is an important distinction between the Draft Provisions and the existing trade secret enforcement framework.
The Draft Provisions do not, however, elaborate on the circumstances in which a trade secret infringement would be considered harmful to China’s national sovereignty, security or development interests, or on the criteria for determining an ‘actual threat’. These questions are relevant to the scope and practical application of the proposed regime. In particular, where a dispute concerns sensitive technologies, significant research and development results or cross-border technology cooperation, the distinction between an ordinary trade secret dispute and conduct falling within the Draft Provisions may require careful assessment.
2. What Investigative and Regulatory Powers Would MOFCOM Have?
Under the Draft Provisions, MOFCOM would be responsible for organizing their implementation, in coordination with other competent authorities.
Article 6 would authorize MOFCOM to investigate whether the relevant conduct of a foreign entity harms China’s national sovereignty, security or development interests. A foreign entity subject to an investigation would be required to cooperate, respond to inquiries, provide accurate information and submit relevant materials. It would also be entitled to present statements and defenses. Where a foreign entity refuses to cooperate or otherwise obstructs an investigation, MOFCOM could decide based on the facts already available to it.
Article 5 sets out a range of measures that MOFCOM could impose on foreign entities meeting the applicable conditions. These include:
1. Restricting or prohibiting the foreign entity from engaging in the import or export of goods and technologies involving China, or in international trade in services, and prohibiting the export of relevant items to that entity.
2. Restricting or prohibiting new investments by the foreign entity in China.
3. Restricting or prohibiting the entry into China of relevant personnel and means of transportation.
4. Restricting or revoking work permits, or permissions to stay or reside in China, for the relevant personnel.
5. Imposing fines in accordance with the applicable law and taking other necessary measures.
MOFCOM could decide to impose one or more of these measures, which would be implemented in coordination with the other competent authorities within their respective statutory powers.
The potential consequences extend beyond the remedies typically available in trade secret disputes. Trade restrictions could affect a multinational company’s supply chain, technology transactions and service arrangements. Restrictions on new investments could affect its expansion plans in China, while measures concerning personnel could have implications for the deployment of management and technical staff.
The Draft Provisions also provide a mechanism for adjusting or removing measures. Under Article 7, a foreign entity that voluntarily takes corrective action, ceases the infringement, eliminates the relevant risks and compensates for losses may apply for the measures to be modified or lifted. Following an assessment, MOFCOM could decide to maintain, suspend, modify or remove the measures.
In addition, Article 9 would allow Chinese enterprises, organizations or individuals that need to transact with a foreign entity subject to the relevant measures under special circumstances to apply to MOFCOM for approval.
Several procedural matters remain to be clarified. The Draft Provisions do not set out detailed rules on the investigation procedures, the standards for determining whether the statutory conditions are satisfied or the mechanisms for challenging decisions. The final text and any subsequent implementing rules will be important in assessing how the proposed powers may be exercised in practice.
3. Which Business Activities Give Rise to Trade Secret Compliance Risks?
For multinational companies, trade secret infringement risks frequently arise in ordinary business operations, particularly where technology, personnel and information move between different entities or jurisdictions.
Cross-border technology transfers and intra-group information sharing are common examples. Multinational groups routinely exchange research results, technical documentation and business information among their Chinese subsidiaries and business partners, overseas headquarters and other affiliates. Such arrangements require appropriate controls over the ownership, authorization, access and permitted use of trade secrets. The fact that information is shared within the same corporate group does not establish that every group entity is entitled to use it without restriction.
Employee recruitment and mobility present another area of concern. When recruiting technical or managerial personnel from competitors or business partners, companies should take reasonable steps to prevent the unauthorized introduction or use of a former employer’s confidential information. Recruitment procedures, confidentiality undertakings and information segregation arrangements can help address these risks.
Trade secret issues may also arise during mergers and acquisitions and technology due diligence. Foreign investors should consider whether the target company has valid rights to the relevant technology and whether technical information disclosed during due diligence is subject to third-party confidentiality or use restrictions. Appropriate controls should continue during post-acquisition integration, when access to technical information may expand across the acquiring group.
Similar considerations apply to suppliers, technology service providers and research partners. Contractual confidentiality obligations are important, but companies should also assess whether their counterparties are lawfully entitled to disclose and permit the use of the technical or commercial information concerned.
These activities would not automatically fall within the proposed special regulatory regime. Nevertheless, they are areas in which trade secret disputes may arise, and existing compliance controls should be reviewed considering the potential consequences contemplated by the Draft Provisions.
4. Does the Use of AI Create Additional Trade Secret Risks?
The increasing use of artificial intelligence has introduced additional considerations for trade secret compliance. AI tools are now used in software development, research, technical analysis and routine business operations, often involving the processing of substantial volumes of information.
For example, an employee may upload confidential technical documentation, source code or research materials belonging to a third party to an external AI platform. A company may use AI tools to analyze technical information obtained with or without proper authorization. In a multinational group, the deployment of a common AI platform may also involve access to or the processing of information by multiple affiliates across different jurisdictions.
These activities raise questions concerning the lawful source of information, the scope of the permitted use, the confidentiality obligations and the controls applicable to information processed through AI systems. The risks will depend on the nature of the information, the company’s rights to use it and the technical and contractual arrangements governing the relevant AI tools.
The Draft Provisions do not specifically regulate AI, and the use of AI would not, in itself, constitute trade secret infringement or trigger the proposed measures. However, where a foreign entity uses AI in connection with conduct that infringes Chinese trade secrets and the additional conditions under Article 2 are satisfied, the involvement of AI would not necessarily place the conduct outside the proposed regime.
Multinational companies should therefore consider trade secret protection as part of their AI governance arrangements. Controls may include internal policies on the use of AI tools, restrictions on uploading third-party confidential information, reviews of the lawful sources of training and input data, and appropriate access controls for AI systems deployed across the corporate group.
5. What Should Multinational Companies Do at This Stage?
The Draft Provisions remain subject to public consultation. Their final scope and implementation are not yet settled, and companies should not treat the proposed measures as obligations already in force.
Nevertheless, the publication of the Draft Provisions provides an opportunity for multinational companies to review their existing trade secret compliance arrangements.
Companies should consider whether their policies adequately identify and protect important technical and business information, including information received from third parties. Attention should be given to cross-border technology transfers and intra-group information sharing, where ownership, authorization and permitted use may not always be sufficiently documented.
Existing procedures for employee recruitment, departures, supplier engagement and transaction due diligence should also be reviewed. Where AI tools are used, trade secret controls should be incorporated into the internal policies and technical safeguards, rather than addressed solely through general information security requirements.
Companies may also wish to review their procedures for responding to regulatory inquiries. An investigation involving a multinational group may require coordination among legal, compliance, IT and business teams in different jurisdictions. Clear responsibilities for preserving evidence, reviewing requested materials and coordinating communications with regulators can help companies respond consistently while complying with the applicable confidentiality and data protection requirements.
The final version of the Draft Provisions should be monitored, particularly for further clarification of the conditions for their application, investigation procedures and the implementation and adjustment of regulatory measures.
Conclusion: Trade Secret Protection and Foreign-Related Regulation
The Draft Provisions indicate a potential development in China’s approach to trade secret protection. In certain circumstances involving foreign entities, trade secret infringement could give rise not only to the protection of private rights but also to regulatory measures intended to safeguard China’s national interests.
A comparison may be drawn with the United States’ Protecting American Intellectual Property Act of 2022 (PAIPA), which provides for sanctions against foreign persons involved in trade secret theft where the relevant statutory conditions are met. Certain measures contemplated by the Draft Provisions also resemble restrictions available under China’s existing foreign-related regulatory regimes, including the Unreliable Entity List Provisions and the Anti-Foreign Sanctions Law. This reflects China’s growing use of trade, investment and personnel-related restrictions as regulatory tools in its foreign-related regulatory framework.
For multinational companies, trade secret protection is increasingly relevant to a broader range of business and compliance functions. In addition to intellectual property management, companies should consider trade secret risks in their cross-border technology arrangements, employee and third-party management, AI governance and regulatory compliance programs. The extent to which the Draft Provisions will affect these activities will depend on the final rules and their application in practice.
For further information, please contact:
SUN Bo (Carol Sun), Partner, JunHe
