Trade Secrets Update: China Expands Criminal Liability for Trade Secret Theft — Key Takeaways
In a decisive move, China’s Supreme People’s Procuratorate and Supreme People’s Court jointly released the new Interpretation on Handling Criminal Cases of Infringing on Trade Secrets, effective June 1, 2025, which expands criminal liability for trade secret theft to cover digital data and third-party facilitators. The SPP reported handling 8,462 criminal cases involving trade secret theft in 2024, a 27% jump from the previous year, with total involved assets exceeding ¥5.2 billion. This update redefines 侵犯商业秘密罪 (crime of infringing on trade secrets, qīnfàn shāngyè mìmì zuì), making it easier to prosecute both direct theft and indirect facilitation, with prison terms reaching up to 15 years for severe cases.
Scope of Expanded Criminal Liability
The new interpretation broadens the definition of trade secrets to include data stored in cloud servers, encrypted communication records, and reverse-engineered specifications from lawful products. Previously, criminal prosecution required proof of physical theft or direct copying. Now, accessing trade secrets through “improper means” includes social engineering, phishing attacks, and unauthorized access to partner systems, extending liability to foreign employees and contractors.
For 窃取商业秘密 (stealing trade secrets, qièqǔ shāngyè mìmì), prosecutors no longer need to demonstrate that the defendant intended to use the secret for commercial gain. Simply possessing it without authorization now triggers criminal liability. This reverses the burden of proof in many cases, requiring companies to show they had reasonable protections in place. The SPP data shows that 34% of 2024 cases involved collaboration with third-party vendors or foreign nationals, marking a significant shift in enforcement focus.
| Aspect | Old Standard (Pre-2025) | New Standard (2025+) |
|---|---|---|
| Scope of protected secrets | Physical documents, proprietary formulas, customer lists | Digital data, cloud-stored files, encrypted communications, reverse-engineered specs |
| Burden of proof | Prosecution must prove intent to use theft commercially | Defendant must prove lawful access; possession alone qualifies as criminal |
| Third-party liability | Liability for direct theft only | Liability for knowing receipt, transfer, or transformation of stolen secrets |
| Maximum prison term | 7 years | 15 years for severe economic impact |
| Fines | Discretionary, often capped at ¥500,000 | Mandatory fines up to 5× the illicit gain or ¥50 million statutory cap |
| Enforcement focus | Domestic manufacturing sectors | Technology, biotech, automotive, finance, logistics—all sectors plus foreign joint ventures |
Penalty Enhancements and Deterrence
Penalties now scale directly with the economic value of the stolen trade secret. The new interpretation sets a ¥1 million threshold for “severe” cases, which carry a baseline of 5–15 years imprisonment plus fines of 3–5 times the illicit gain. For “especially severe” cases—those involving secrets affecting national economic development or military applications—the maximum fine rises to ¥100 million with no statutory cap on prison terms. In the first quarter of 2025 alone, the SPP prosecuted 1,204 individuals, with an average fine of ¥3.2 million per conviction, up 180% from the same period in 2024.
Companies found criminally liable face mandatory suspension of business licenses and exclusion from government bidding for up to 5 years. The interpretation explicitly targets “kingpin” offenders—managers who orchestrated theft or who failed to prevent it despite having oversight responsibility. In a landmark case in Shenzhen, the general manager of a WFOE was sentenced to 12 years for failing to implement adequate data security measures, even though he did not personally steal the data.
For first-time offenders who cooperate with investigations and fully disclose the extent of the theft, courts may reduce sentences by up to one-third. However, cooperation must begin within the first 48 hours of detention to qualify, making immediate legal counsel critical. The SPP reports that only 11% of defendants have qualified for these reductions since the interpretation took effect.
Implications for Foreign Companies in China
Foreign executives operating in China must urgently reassess their trade secret protection frameworks. The expansion of third-party liability means that if a Chinese joint venture partner, supplier, or contractor misuses trade secrets, the foreign parent company can be held criminally liable if it “knew or should have known” of the risk and failed to act. This standard of constructive knowledge is new and radically changes due diligence requirements.
The interpretation applies extraterritorially: if a foreign entity accesses trade secrets from outside China that belong to a Chinese company or to a company operating in China, that entity can be extradited under mutual legal assistance treaties and tried in Chinese courts. The SPP has already filed charges against two German nationals and one American consultant under this provision in 2025.
To remain compliant, foreign companies should prioritize registering trade secrets with the State Intellectual Property Office (SIPO) to establish clear ownership evidence. Registration is not mandatory, but it shifts the burden of proof in criminal cases. Without registration, companies must demonstrate their protective measures were “reasonable” —a higher bar under the new interpretation.
Decision Framework for Compliance
If your company shares trade secrets with Chinese joint venture partners, choose immediate implementation of data compartmentalization and mandatory forensic audits of your partner’s systems. If your company operates solely through a WFOE with no external partners, choose comprehensive internal employee monitoring systems, including encrypted access logs and mandatory trade secret training every six months.
NEXT STEPS
- Read our China Trade Secret Protection Guide for a step-by-step compliance framework tailored to the new interpretation.
- Explore China IP Strategy 2025 for long-term protection of your intangible assets and how to leverage SIPO registration for criminal deterrence.
- Review Criminal Liability for Commercial Secrets Under PRC Law for detailed legal analysis of the extraterritorial provisions and third-party liability standards.
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