Beijing has significantly expanded its definition of trade secrets to encompass algorithms, datasets, and computer programs, marking the first update to China's trade secret regulations since 1998. The new rules, which took effect on Monday, classify any non-public technical or business information with commercial value as a trade secret, including structures, raw materials, formulas, processes, methods, data, and code.
The regulations, issued by China's State Administration for Market Regulation (SAMR), impose strict controls on remote work and cross-border collaboration. Companies must implement access controls, data anonymisation to mask personally identifiable information, and maintain detailed logs of who has accessed, copied, or modified protected data. Violations can result in fines of up to 5 million yuan (approximately €630,000).
Broader Implications for European Businesses
For European companies operating in China or collaborating with Chinese partners, the new rules create additional compliance burdens and legal risks. The explicit inclusion of AI-related data as trade secrets means that any algorithm, dataset, or program not publicly disclosed is now automatically protected, potentially limiting the flow of technical information across borders. This aligns with China's broader push to reduce foreign access to its technology, as seen in recent restrictions on AI talent movement and the blocking of Meta's acquisition of Chinese-founded AI company Manus in May.
The regulations come amid heightened tensions between Beijing and Brussels over technology and data governance. The European Union has been pursuing a strategic autonomy push to reduce dependence on China in critical sectors, including semiconductors and artificial intelligence. The new Chinese rules could complicate EU efforts to engage with Chinese tech firms, particularly in joint research and development projects.
China's move also coincides with its annual "Enterprise Trade Secret Protection Capacity Enhancement Service" month in June, a government-led initiative launched in 2023 to strengthen corporate compliance. This year's edition is likely to focus heavily on AI and data protection, given the updated legal framework.
Impact on Global Tech Competition
The updated regulations are part of a broader pattern of Chinese state intervention in technology markets. An OECD report recently highlighted that China's state subsidies have reached record levels, distorting global markets. The new trade secret rules could further insulate Chinese AI firms from foreign competition while making it harder for European companies to access Chinese technology or collaborate on AI research.
European policymakers are already grappling with how to respond. The EU is set to join the US-led chip alliance Pax Silica to counter China's AI ambitions, and the European Parliament's trade committee recently approved an EU-US data deal despite weakened safeguards. The new Chinese regulations may accelerate calls in Brussels for stricter controls on technology transfers and data flows with China.
For European businesses, the message is clear: China's AI data is increasingly off-limits, and the legal risks of cross-border collaboration are rising. Companies will need to reassess their compliance strategies and consider whether the benefits of engaging with Chinese partners outweigh the potential legal and reputational costs.
