China Proposes Strict Rules to Protect Trade Secrets, Including Trade Restrictions and Investment Curbs on Foreign Entities

Provisions on trade secrets opened for public feedback, designed to protect ‘national sovereignty’ and ‘development interests’ against foreign entities

· Draft rules issued: China’s Ministry of Commerce (MOFCOM) has released draft rules to protect Chinese trade secrets and invited public comments until 24 November 2026.

· Scope of application: The proposed rules would apply where foreign entities infringe Chinese trade secrets during international economic, trade or related activities, and such conduct endangers or poses a real threat to China’s national sovereignty, security or development interests.

· Trade restrictions and bans: MOFCOM could restrict or prohibit foreign entities from trading goods, technology and services involving China.

· Investment restrictions: The ministry could impose restrictions on new investments in China by foreign entities found to have engaged in prohibited conduct.

· Restrictions on personnel: Possible measures include:

o Restricting or prohibiting the entry of personnel and transport vehicles into China.

o Revoking or restricting work permits and residence rights of the entities’ personnel.

· Financial penalties: Foreign entities could face fines proportionate to the severity of the infringement.

· Investigation powers: MOFCOM would be authorised to investigate whether foreign entities’ conduct threatens China’s sovereignty, security or development interests.

· Cooperation and defence: Entities under investigation would be required to cooperate and provide relevant information, while being allowed to present a defence. If an entity fails to cooperate or obstructs the investigation, MOFCOM could issue a ruling based on the available facts.

· Reporting mechanism: Companies and individuals would be permitted to report alleged trade-secret infringements by foreign entities to MOFCOM.

· Strategic industries: The proposed rules are particularly significant for sectors such as electric vehicles, batteries and rare-earth processing, where technological know-how and trade secrets are critical to competitiveness.

· Link with technology export controls: The draft follows a separate proposal by MOFCOM and the Ministry of Science and Technology earlier in October 2026 to revise technology export restrictions affecting 14 technologies across sectors including artificial intelligence, biotechnology and photovoltaic solar power.

· China–US–EU competition: The proposed measures come amid intensifying technological and economic competition between China, the United States and the European Union. According to Economist Intelligence Unit economist Xu Tianchen, protecting trade secrets has become increasingly important as China expands international engagement.

· Background—US sanctions: The US State Department recently imposed sanctions under the Protecting American Intellectual Property Act on five Chinese entities suspected of stealing trade secrets from American companies. The entities reportedly include Shanghai Zhisuan Technology, venture capital firm MiraclePlus and three related entities.

· China’s response: MOFCOM strongly opposed the US sanctions, arguing that they unfairly targeted Chinese companies. It maintained that the growth of Chinese AI companies resulted from fundamental research and sustained investment in innovation, rather than trade-secret theft.

Key takeaway: The proposed rules would give China broader powers to investigate alleged foreign trade-secret infringements and impose trade bans, investment restrictions, personnel-related measures and fines where national sovereignty, security or development interests are considered to be threatened. Public comments are invited until 24 November 2026.

[ABS News Service/26.10.2026]

China has drafted special rules to protect the country’s trade secrets and is seeking public feedback on the proposed strictures, the Ministry of Commerce said on Monday.

In the draft document, the ministry said the rules apply “where a foreign entity engages in acts infringing upon Chinese trade secrets in the course of international economic, trade and related activities” and those acts endanger or pose a real threat to “China’s national sovereignty, security and development interests”.

Under the draft rules, the ministry could impose one or more measures on foreign entities found to have engaged in prohibited conduct, including restricting or banning their trade in goods, technology and services involving China and curbing new investment in China.

Other potential measures include limiting the entry of entities’ personnel and transport vehicles into China, revoking or restricting work permits and residence rights for entities’ personnel within the country, and imposing fines proportionate to the severity of the offence.

The draft rules come as China has built a leading position in sectors such as electric vehicles, batteries and rare earth processing, industries in which technological know-how and trade secrets are central to competitiveness.

“Keeping trade secrets has indeed become more important in the context of China’s ‘competition’ with the US and the EU,” said Xu Tianchen, a senior economist at the Economist Intelligence Unit.

“Especially as China has adopted a more open-door policy to international visitors, companies will want to step up their vigilance against potential commercial espionage.”

The commerce ministry’s draft rules follow a separate draft plan it issued with the Ministry of Science and Technology earlier this month, proposing export bans that would affect 14 technologies in sectors ranging from artificial intelligence to biotechnology and photovoltaic solar power.

Xu added that the technology export catalogue revisions defined which technologies should be protected, while the new rules would set out how governments and businesses should respond.

The new rules would also authorise the commerce ministry to investigate whether foreign entities’ conduct represents a threat to China’s sovereignty, security or development interests.

The rules would require foreign entities under investigation to cooperate and provide relevant information, while allowing them to mount a defence. If an entity fails to cooperate or “otherwise obstructs” the probe, however, the rules would permit the ministry to issue a ruling based on the available facts.

Companies and individuals could also report alleged infringements by foreign entities to the ministry, according to the draft document.

According to the ministry’s statement, the draft rules are now open for public comment, with feedback due by November 24.

Last week, the US State Department announced that it was imposing sweeping sanctions under the Protecting American Intellectual Property Act on five Chinese entities suspected of stealing trade secrets from American companies, including Shanghai Zhisuan Technology – a firm founded by former Google software engineer Ding Linwei – venture capital firm MiraclePlus and three related entities.

In response, the commerce ministry said it “firmly opposed” the move, which it said “stigmatised Chinese companies” and seriously undermined their rights and interests.

It added that the rapid development of Chinese artificial intelligence companies was driven by years of work in fundamental research and sustained investment in innovation, and had nothing to do with the theft of trade secrets.