The protection of trade secrets in China has undergone a fundamental modernization with the adoption of the Regulation on the Protection of Trade Secrets by the State Administration for Market Regulation (SAMR) on February 24, 2026. The Regulation, which enters into force on June 1, 2026, replacing the provisions from 1995, constitutes the most significant reform of Chinese trade secret protection in three decades. This article analyzes the central innovations of the reform – from the expanded definition of trade secrets, through the clarification of protection requirements, to the strengthening of administrative enforcement powers – and examines their practical implications for businesses. Particular attention is paid to the digital transformation of the protection regime, the introduction of a burden-of-proof shifting mechanism, and the significant increase in sanctions.
I. Introduction
Chinese law on the protection of trade secrets (商业秘密 – shāngyè mìmì) has evolved over the past three decades from a rudimentary regulatory framework into a differentiated protection system. The original Provisions on Prohibiting Infringement of Trade Secrets from 1995 emerged in an era when trade secrets existed primarily in the form of physical documents such as blueprints or customer files. With the rapid digitization of the economy and the growing importance of intangible assets – from algorithms to datasets to customer behavior profiles – these regulations proved increasingly inadequate.
The 2026 reform is the result of a multi-year legislative process, prepared by three significant amendments to the Anti-Unfair Competition Law (AUCL) in 2017, 2019, and 2025. The new Regulation closes a long-standing regulatory gap: while the AUCL and Supreme Court jurisprudence had already established modernized standards for trade secret protection, there was a lack of corresponding concretization at the level of administrative enforcement. This discrepancy led to a "bifurcation" of protection levels, where judicially recognized positions were difficult to enforce in administrative proceedings.
The new Regulation – expanded from 12 to 31 articles – is to be understood not as a revolutionary break but as a systematic codification and operational concretization of existing legal principles. It reflects the strategic importance of trade secret protection in the context of China's innovation policy, which received a prominent position in the 2026 "Two Sessions."
II. The Expanded Subject Matter of Protection: Terminological Re-Contouring
A. The Statutory Definition
Article 5 of the new Regulation defines a trade secret as "technical, operational, or other business information that is not publicly known, has commercial value, and has been subject to reasonable confidentiality measures by the right holder." Although this definition formally corresponds to that of the AUCL, it undergoes considerable conceptual expansion through the Regulation's further provisions.
B. The Digital Transformation of the Subject Matter of Protection
One of the most significant innovations is the explicit extension of protection to digital assets. Article 5(2) now expressly includes "data, algorithms, computer programs, and code" among the technical information. This enumeration has considerable practical relevance, as training datasets for AI models, algorithm iteration protocols, and user behavior analyses are now unmistakably protectable as trade secrets.
In the area of business information, the concept of customer data is substantially expanded. Not only names and contact details are protected, but explicitly also "transaction habits, purchasing intentions, and the content of previous business relationships." This expansion closes a protection gap that was frequently exploited by competitors to gain access to valuable customer relationship data through employee poaching.
C. Process and Negative Knowledge as Protected Subject Matter
A doctrinally particularly noteworthy step is the explicit recognition of "intermediate results or failed experimental data as well as technical solutions" as protectable trade secrets in Article 7. This provision codifies the recognition that even ostensibly "negative" information – i.e., data about unsuccessful research approaches – can have considerable commercial value by helping competitors avoid costly dead ends.
For research-intensive companies, particularly in the pharmaceutical industry, biosciences, and semiconductor development, this signifies a paradigm shift. Previously, there was a risk that such data would not be recognized as trade secrets in disputes due to lack of immediate economic exploitability. Now, they are explicitly protected, provided they meet the three-step test (secrecy, value, confidentiality measures).
III. The Constitutive Requirements for Protection
A. The Quality of Secrecy ("Not Publicly Known")
Article 6 of the Regulation significantly clarifies the standard for assessing the quality of secrecy. The decisive point in time for assessment is the "time of the alleged infringement." This clarification prevents infringers from arguing that a trade secret became publicly known after the fact – for example, through their own unauthorized disclosure.
Article 6(3) holds particular practical significance, according to which information arising from the "processing, improvement, or compilation" of publicly known information can itself acquire the quality of secrecy. This provision reflects the reality of modern innovation, which often consists not in the creation of entirely new knowledge but in the proprietary processing and analysis of existing data.
B. Commercial Value
The concept of value is comprehensively delineated in Article 7. It includes both positive values (increased sales, profit growth, cost reduction) and so-called negative values (shortening of development times, avoidance of misinvestments). The explicit mention of "reduction of research time" and "competitive advantages" as value categories significantly expands the scope of application.
C. The Reasonableness of Confidentiality Measures
Article 9 of the Regulation contains a detailed catalog of eight recognized confidentiality measures, concretizing the previously vague requirements of the predecessor regulation:
- Conclusion of confidentiality agreements
- Establishment of confidentiality policies and training
- Physical access restrictions to sensitive areas
- Technical measures for remote work and cross-border cooperation (access rights, data masking, logging)
- Labeling, classification, and encryption of trade secret carriers
- Access restrictions on computer devices and network storage
- Obligations of departing employees to return and delete
- Other reasonable measures
The inclusion of measures for remote work and cross-border cooperation in item 4 is a clear signal for the era of digital and mobile working environments. Companies must now be able to demonstrate that they have implemented technical access controls, logging, and data masking.
IV. The Expanded Catalog of Infringing Acts
A. Digitalization of Prohibition Norms
Article 10 defines "improper means" comprehensively and explicitly includes "electronic intrusion" as well as "unauthorized downloading or transmission" of trade secrets to uncontrolled storage media. This closes the previously existing gray area of digital espionage. An employee who, before leaving the company, uploads company code to their private cloud or personal email account now commits a clear infringement – regardless of whether they subsequently use the data.
B. Third-Party Liability and Indirect Infringement
The Regulation extends liability in Articles 13 and 14 to third parties who knowingly or negligently participate in infringements. This covers in particular:
- Instigating or inducing employees to commit infringements (for example, by offering bonuses or promotions)
- Providing financial resources, technology, or equipment to infringers
This provision targets the widespread practice of competitors deliberately poaching employees of a rival company to gain access to its trade secrets. The new regulation enables direct administrative liability of the poaching company.
C. The Privileging of Legitimate Competition
To balance the expanded liability provisions, Article 15 explicitly codifies three categories of legitimate conduct:
- Independent development: Self-developed or self-discovered information does not infringe any rights.
- Reverse engineering: The analysis of lawfully acquired products through disassembly, measurement, or analysis is permissible.
- General employee knowledge: Former employees may use general knowledge, skills, and industry experience acquired during their employment in a new position.
- The third category is particularly significant in practice, as it draws a clear line between protectable trade secrets and the occupational freedom of employees.
V. Administrative Enforcement: Procedure and Powers
A. The Two-Stage Burden of Proof for Initiation
Article 18 of the Regulation significantly lowers the threshold for initiating an administrative procedure by distinguishing between "preliminary evidence" and "specific indications." An applicant now only needs to provide:
- Preliminary evidence: Proof of the quality of secrecy, value, and confidentiality measures taken
- Specific indications: Hints of the alleged infringer's access or indications of improper means
This replaces the previously required, often impossible burden of having to prove the identity of the information already at the application stage.
B. The Shifting of the Burden of Proof in Administrative Proceedings
Arguably the most consequential innovation is found in Article 20(2): the introduction of a rebuttable presumption of infringement. If the right holder proves that (1) the information used by the alleged infringer is "substantially identical" to the trade secret and (2) the alleged infringer had access to the secret, then the market regulatory authority may assume an infringement.
The burden of proof then falls on the alleged infringer, who must prove a lawful source (e.g., independent development or reverse engineering). This provision significantly reduces the typical evidentiary problem for trade secret holders, as they do not need to provide direct proof of disclosure or use.
C. Expanded Investigative Powers of Authorities
The market regulatory authorities receive extensive investigative powers under Article 23:
- Inspection of business premises
- Interviewing involved parties
- Inspection and copying of documents
- Seizure of relevant assets
- Inspection of bank accounts (with approval from the higher authority)
At the same time, authorities are obliged under Article 21 to maintain strict confidentiality during proceedings to minimize the risk of secondary disclosure.
D. The Qualification of Legal Protection
Article 3 establishes a two-tier system of jurisdiction: while general trade secret cases can be handled by authorities at the county level and above, technical trade secret cases are fundamentally reserved for authorities at the prefecture level and above. This "upward referral" accounts for the increased technical complexity of such cases and ensures that only qualified investigators with appropriate expertise make decisions. Delegation to the county level is only possible with the express consent of SAMR.
VI. Sanctions and Legal Consequences
A. Administrative Sanctions
The sanctions are drastically increased in Articles 24 and 25:
- Standard case RMB 100,000 – 1,000,000 Cessation order, confiscation of illegal gains
- Serious case RMB 1,000,000 – 5,000,000 Additionally: seizure and destruction of infringing items
The predecessor regulation only provided for a maximum fine of RMB 200,000 – an amount that, given the often high value of trade secrets, did not have sufficient deterrent effect.
Article 26 defines "serious circumstances" including, among others, significant direct damage, substantial impairment of the right holder's business operations, endangerment of public interests, or a repeat offense within two years.
B. Interconnection with Civil and Criminal Law
The Regulation clarifies that administrative liability leaves civil and criminal liability unaffected. Where there is suspicion of a criminal offense, authorities are obliged to involve the criminal prosecution authorities. Chinese criminal law threatens serious cases of trade secret infringement with imprisonment of up to ten years.
C. Extraterritorial Application
Notable is Article 29, which extends the applicability of the Regulation to cross-border infringements that harm rights holders domiciled in China. This provision enables Chinese authorities to take action against infringers domiciled abroad, provided the harmful effect occurs in China.
VII. Practical Implications for Businesses
A. Compliance Implications: The New Duty of Care
The Regulation significantly increases the requirements for internal corporate compliance systems. Companies must now establish a three-tiered protection system:
- Identification: Systematic recording and classification of trade secrets (including intermediate and negative results)
- Technical protection: Implementation of access controls, logging systems, and data masking for remote access
- Personal protection: Contractual safeguards (confidentiality and non-compete agreements) as well as procedural security of entry and exit processes
Particular importance attaches to documentation. Companies should consider using blockchain-based trusted timestamps or notarial deposits for particularly sensitive trade secrets. Such measures can serve as proof of the time of secret creation in disputes.
B. Risks for Investors and Acquirers
In the context of mergers & acquisitions and technology transactions, new due diligence obligations arise. An acquirer who takes over a company that may be using third-party trade secrets can be held liable under Article 14 if it should have recognized the circumstances. This requires a deepened legal due diligence regarding the origin of the technology and the target company's compliance with confidentiality obligations.
C. Strategies for Rights Enforcement
The Regulation opens new strategic options for rights holders:
- Administrative remedy as first choice: Due to the lower evidentiary hurdles and faster procedures (typically months rather than years in civil litigation), the administrative complaint is now often the more efficient route.
- Combination with civil action: After a successful administrative finding, the civil enforcement of damages claims can be significantly facilitated.
- Preliminary relief: The expanded investigative powers of the authorities (particularly seizure) enable more effective preliminary relief than is possible in civil proceedings through preliminary injunctions.
VIII. Assessment and Outlook
The Regulation on the Protection of Trade Secrets of 2026 represents a milestone in the development of Chinese intellectual property law. It completes the long-overdue adaptation of trade secret protection to the digital economy and creates a coherent, enforcement-strong protection regime. From a comparative legal perspective, China now approaches the standards of Western legal systems in several aspects: the expanded protection of digital assets, the shifting of the burden of proof for "substantially identical plus access," the explicit recognition of reverse engineering as lawful, and the differentiated treatment of employee knowledge are elements found in similar form in European and US law. At the same time, challenges remain. The practical effectiveness of the new regulations will critically depend on the enforcement competence of local market regulatory authorities – particularly in technically complex cases. Moreover, it remains to be seen whether the courts will consistently apply the principles developed in the Regulation in civil practice.
For companies active in China or cooperating with Chinese partners, the Regulation is a clear imperative to act. The time remaining until June 1, 2026, should be used to review internal compliance systems, update confidentiality agreements, and implement technical protection measures. Companies that fail to do so risk not only losing legal protection for valuable trade secrets but also exposing themselves to liability risks.
The future of trade secret protection in China will show whether the ambitious provisions of the new Regulation can achieve their intended effect in practice. However, the direction of the reform is clear: China increasingly understands trade secret protection as an integral part of its innovation and competition policy and is prepared to provide the legal and administrative instruments for this purpose.