China Proposes 6 Possible Measures Over Overseas Trade Secret Violations
Key Facts
China’s Ministry of Commerce published draft provisions on October 26, 2026, to protect Chinese trade secrets, proposing measures that could affect foreign entities in trade, investment, work and residence in the country. The document remains a proposal open for consultation, with the ministry setting November 24, 2026, as the deadline for comments. The text links the measures to violations in international economic or trade activities that harm China’s interests in sovereignty, security or development, or pose a real threat to them. Under the published conditions, a dispute over a trade secret alone would not provide sufficient grounds for action. The provisions would take effect on the date of their final announcement, which has not been specified.
The draft defines a foreign entity as a foreign company, another organization or an individual, broadening the range of parties that could face investigation and the proposed measures. Article 5 lists six types of measures, one or more of which could be taken depending on the circumstances. They include restricting or prohibiting international trade in goods, technology and services related to China, and imposing restrictions on new investment in the country. The draft also allows restrictions on the entry of people or vehicles, and on work or residence permits, including their cancellation. It adds the possibility of fines proportionate to the severity of the case, as well as other measures authorities consider necessary. Reuters reported that the restrictions could include imports, exports and new investment, underscoring the potential breadth of the impact on cross-border corporate operations.
The draft authorizes the Ministry of Commerce to open an investigation to determine whether a violation harms China’s interests, and requires the foreign entity under investigation to cooperate, respond to inquiries and provide relevant materials. If the entity fails to cooperate or otherwise obstructs the investigation, the ministry may make a decision based on the facts it has obtained. This places the burden of providing information on the party under investigation, while allowing the ministry to proceed with the case when cooperation is absent. The facts set out here specify no investigation deadline or timetable for a decision. Any specific measure would remain dependent on the outcome of an assessment of the case and the conditions set out in the draft.
The draft allows an entity subject to measures to request that they be adjusted or lifted if it stops the violation, removes the risk and compensates for losses. After assessing the request, the ministry may maintain, suspend, modify or revoke the measures. The document also provides a route for exempting transactions in special circumstances: Chinese companies, organizations and individuals may seek the ministry’s approval to deal with a foreign entity subject to the measures or provide it with related materials. The application must state the facts and reasons, and the draft permits the transaction only after ministry approval. These provisions link the continuation of restrictions to addressing the violation and risk and providing compensation, while leaving room for exceptional transactions with authorization.
The draft follows the entry into force on June 1, 2026, of a Chinese regulation on trade secret protection, which is based on the Anti-Unfair Competition Law and focuses on protecting trade secrets in commercial competition. The new provisions set out a separate framework for addressing actions attributed to foreign entities in international economic and trade activities, under a standard tied to interests in sovereignty, security and development. In a separate development in October 2026, the United States imposed sanctions on five Chinese companies linked to a trade secret case involving Google. Beijing said it opposed the sanctions, and China’s Ministry of Commerce said the country’s artificial intelligence sector had developed through investment, innovation and basic research, denying that it was built on trade secret theft. The Ministry of Commerce draft remains open for comments until November 24, 2026, and, if adopted in final form, its provisions will take effect on the date of their announcement.