What qualifies as a trade secret under China’s Anti-Unfair Competition Law?

For foreign companies operating in China, understanding what constitutes a legally protectable trade secret is the first and most critical step in safeguarding proprietary information. China’s legal framework for trade secrets is primarily defined by the Anti-Unfair Competition Law (AUCL), most recently amended in 2019. This FAQ provides a comprehensive breakdown of the statutory definition, the three-part test for qualification, and practical considerations for foreign businesses seeking protection under Chinese law.

The Three-Part Legal Test

Article 9 of the Anti-Unfair Competition Law defines a trade secret as information that satisfies three cumulative requirements:

1. Secrecy (Non-public knowledge) — The information is not known to the public.
2. Commercial Value — The information has actual or potential commercial value.
3. Reasonable Protection Measures — The rights holder has taken reasonable steps to keep the information confidential.

A failure on any one of these three prongs means the information does not qualify as a trade secret, and the AUCL will not apply. Each prong carries its own nuances, particularly for foreign companies operating across borders.

1. Secrecy: What does “not known to the public” mean?

The secrecy requirement is the most vigorously contested element in Chinese trade secret litigation. Chinese courts interpret “not known to the public” as information that is:

• Not generally known or readily accessible to persons in the relevant industry
• Not published in publicly available materials, including patent filings, academic journals, industry reports, or public databases
• Not ascertainable through reverse engineering of a lawfully obtained product

Importantly, the standard does not require absolute secrecy. Information known to a limited circle of employees or business partners who are bound by confidentiality obligations may still satisfy the secrecy requirement. However, information that has been disclosed without confidentiality restrictions — even inadvertently — is likely to lose its trade secret status.

Key consideration for foreign companies: Information that is a trade secret in your home country may not automatically qualify in China if it has been disclosed in Chinese-language industry publications, discussed at trade shows in China, or shared with Chinese partners without a proper NDA.

2. Commercial Value: What counts as “value”?

The AUCL requires that trade secret information has “actual or potential commercial value.” Chinese courts interpret this broadly:

• Actual value: Information that directly generates revenue, reduces costs, or provides a competitive advantage. Examples include customer lists, pricing strategies, manufacturing processes, and proprietary formulas.
• Potential value: Information that may not currently generate revenue but has future commercial potential. This includes R&D data, test results, business plans, and market analysis.
• Negative value: Even information about approaches that did not work (e.g., failed experimental results) can have commercial value because it saves competitors from pursuing dead ends.

Chinese courts do not require the information to be actively used in commerce at the time of misappropriation. If the information could reasonably provide a competitive advantage if used, the commercial value prong is satisfied.

3. Reasonable Protection Measures: What must you actually do?

This is the most actionable prong for foreign companies. The AUCL requires that the rights holder has taken “reasonable confidentiality measures.” What constitutes “reasonable” depends on the nature of the business and the type of information, but Chinese courts generally look for:

Essential Measures

• Written confidentiality agreements with employees, contractors, and business partners. These must specifically identify the information considered confidential.
• Confidentiality clauses in employment contracts — every employee who accesses trade secrets should sign an agreement with clear confidentiality provisions.
• Access controls: Password protection, encryption, segregated server access, and role-based permissions for sensitive data.
• Physical security: Locked filing cabinets, restricted access areas, visitor logs, and secured server rooms.
• Company policies: A written confidentiality policy that is communicated to all employees through training and acknowledgment forms.
• Marking documents as “Confidential” or “Proprietary” — while not strictly required, this demonstrates intent to protect.

What Is NOT Enough

Chinese courts have found that the following measures alone are insufficient:

• Vague confidentiality clauses that do not identify specific information
• Oral warnings without written documentation
• Generic non-disclosure agreements that are not tailored to the specific information
• Post-hoc confidentiality designations after a dispute has arisen

Practical tip for foreign companies: The standard is higher than in many Western jurisdictions. Chinese courts expect documented, systematic protection measures, not merely contractual language. A foreign company that relies solely on a US-style proprietary information agreement without implementing access controls and physical security in its China operations may find its trade secret claim rejected.

Types of Information That Can Qualify as Trade Secrets

Chinese courts have recognized a wide range of information as trade secrets, including:

What Does NOT Qualify

Information that falls outside trade secret protection under the AUCL includes:

• General knowledge and skills that employees acquire through experience in the industry
• Publicly available information that can be found in patents, publications, or public databases
• Information obtainable through reverse engineering of a lawfully acquired product
• Information that the rights holder has failed to protect with reasonable measures
• Personal expertise of employees — Chinese courts distinguish between company-owned trade secrets and the personal skills an employee takes to a new job

The 2019 Amendments: Expanded Protections

The 2019 amendment to the AUCL significantly broadened trade secret protections:

• Expanded definition of trade secret infringement to include “indirect” acquisition through third parties
• Increased statutory damages from a maximum of RMB 3 million to RMB 5 million (approximately USD 700,000)
• Shifted burden of proof: If the rights holder provides preliminary evidence, the burden shifts to the accused party to prove they did not misappropriate the secret
• Expanded liability to include自然人 (natural persons) and organizations beyond just “business operators”
• Criminal liability interface: Enhanced coordination between civil AUCL claims and criminal prosecution under Article 219 of the Criminal Law

Practical Takeaways for Foreign Businesses

1. Document everything. Chinese courts place heavy weight on documentary evidence. Maintain records of confidentiality agreements, training sessions, access logs, and security measures.
2. Implement China-specific protection measures. Do not rely solely on global policies designed for your home market. Adapt confidentiality measures to Chinese legal standards.
3. Segment information access. Not every employee needs access to all trade secrets. Implement role-based access controls in your China operations.
4. Use both contract and technical measures. A confidentiality agreement alone is rarely sufficient. Combine it with password protection, encryption, and physical security.
5. Act quickly on suspected breaches. Chinese courts consider prompt action as evidence that the information was truly valued and protected.
6. Consider multi-layered protection. Some technical information may also qualify for patent protection. Consult with Chinese IP counsel about whether to seek patent registration (which requires public disclosure) or maintain trade secret status.

Conclusion

Under China’s Anti-Unfair Competition Law, information qualifies as a trade secret only if it meets all three requirements: it is not publicly known, it has commercial value, and the rights holder has taken reasonable confidentiality measures. Foreign companies must be particularly attentive to the third prong, as Chinese courts apply a more rigorous standard for “reasonable protection measures” than many other jurisdictions. By implementing comprehensive, documented, and China-specific protection measures — including written agreements, access controls, physical security, and employee training — foreign businesses can position themselves to enforce their trade secret rights effectively under the AUCL.

Last updated: July 2026. This article provides general guidance and does not constitute legal advice. Foreign businesses should consult with qualified Chinese legal counsel for case-specific recommendations.

Official Sources

• China National Intellectual Property Administration: Trademark Law
• China National Intellectual Property Administration: official service portal
• World Intellectual Property Organization: China legal and treaty resources