China plans new measures against foreign entities that infringe on local trade secrets, a boost to its legal defences in a technology race with the United States.

New rules will cover any infringement that harms or “poses a real threat to China’s national sovereignty, security and developmental interests”, according to proposals released by the commerce ministry on Monday. The window for public comment is open until November 24.

The draft rules toughen China’s intellectual property protection by broadening the scope for government intervention and creating penalties that would effectively shut violators out of the country’s huge domestic market. The proposals come as China increasingly builds a technology lead over the US and Europe in industries such as electric vehicles, clean energy and open-weight artificial intelligence (AI) models.

Planned punishments include bans or restrictions on trading and investments in China as well as more limited steps such as curbs on the entry of personnel and vehicles, the cancellation of work visas and fines.

A foreign entity will be able to request the lifting of penalties if it “voluntarily takes corrective action, ceases the infringement, eliminates the danger, and compensates for losses”, according to the draft law.

The US last week announced sanctions against five Chinese entities suspected of stealing trade secrets from American businesses. The list included Shanghai Zhisuan Technology, whose founder, ex-Google engineer Ding Linwei, was convicted of stealing AI trade secrets from the US tech giant in January.

China’s commerce ministry said it “firmly opposed” the move, which “stigmatised Chinese companies” and undermined their rights and interests.

US investors face tougher controls on deals involving Chinese technology companies under proposed regulations published by the US Treasury last week. Biotechnology, advanced chips, AI and hypersonic weapons systems are among areas covered by the rules, which implement the 2025 Comprehensive Outbound Investment National Security Act. The law boosts scrutiny of investment in China and other adversaries including Iran and Russia. “US restrictions on investment in China would not only harm China-US economic and trade cooperation but also hurt the interests of US firms,” China’s commerce ministry said.

The European Union plans to introduce measures to slow imports of Chinese-made chemicals, furniture and machinery as soon as the first quarter of 2027, Bloomberg News reported on Monday, citing people familiar with the matter. The measures, which could include import caps or tariffs, aim to mirror the bloc’s recent success in restricting the flow of Chinese-made hybrid cars. European leaders have swung to supporting tougher measures against China to help pare a bilateral trade deficit that has surpassed €1 billion (US$1.2 billion) a day.

AI giant Anthropic filed for a potentially record initial public offering on the Nasdaq, even as rising concerns about the long-term profitability of the technology weigh on stock markets from Shanghai to New York. The Claude developer is reportedly planning to seek as much as US$100 billion, surpassing the US$85.7 billion raised by tech mogul Elon Musk’s SpaceX in June. Facebook owner Meta separately announced plans to sell US$97.5 billion of stock to fund AI investments.

Serious about IP: While IP theft remains an important challenge, it is an insufficient framework for understanding modern China’s relationship with IP. The image of China as simply a thief with disregard for IP rights reflects an earlier stage of its technological development. Over the last two decades, China has become a world-leading innovator in a range of industries and a major IP producer. It now understands IP rights as an instrument that can serve its broader technological objectives, and it has strengthened its IP institutions accordingly.

In other terms, China has become serious about IP because IP can now advance China’s national interests. (Center for Strategic and International Studies) Added tools: China is turning its experience of external technological restrictions into additional institutional tools to protect its own technological strengths. For now, the target is not limited to overcoming restrictions through greater technological self-reliance; it has also started to strengthen trade-secret protection and make the theft of trade secrets and the use of Chinese technology more costly. (Inside China, Substack) Tech goes global: The government is increasingly concerned not only with how technology leaves China, but also who controls it after it goes overseas, and what happens if foreign parties obtain it improperly.

The technology export control system, overseas investment rules, and proposed trade secret protection measures each have their own scope and legal thresholds. But all three address different aspects of the same challenge: protecting technology-related rights and interests as Chinese companies expand internationally. (Geopolitechs, Substack) Preemptive action: The Special Provisions on Protecting China’s Trade Secrets (Draft for Comment) has two triggers, and the second – conduct that poses an “actual threat” – covers situations where no harm has yet occurred, which gives MOFCOM a basis to act preemptively.

Further, the term Chinese trade secrets is unclear – is it dependent on the holder’s nationality, the location of the trade secret, or some other connection … (The National Law Review) Severe incidents: Researchers at Harvard University and the University of California, Berkeley, have catalogued more than 300 severe incidents of Chinese cyber-espionage and intellectual property theft from 1995 to 2024. In every one of these incidents, the United States failed to secure its assets and critical technologies, including semiconductor manufacturing plans and aerospace designs.

Foreign adversaries used these attacks to accelerate their own development, progressing by theft rather than by innovation. (Foreign Affairs, opinion) China has long been the target of US and European complaints about intellectual property theft, including criminal proceedings. These days, the country has commercial secrets of its own to protect.

The switch-around is a remarkable development, as China didn’t even enact a patent law until 1984. Before that, intellectual property was held by state research institutes and state-owned enterprises as proprietary national technology instead of corporate patents.

The first modern transfer of Chinese intellectual property (IP) took place in 1980 after US industrialist Armand Hammer heard of the country’s success with hybrid strains of rice that were resistant to insects, according to Sigrid Schmalzer’s 2016 book . A unit of Hammer’s Occidental Petroleum subsequently signed a deal with China National Seed Corp., allowing the US company to produce and market the hybrid rice strains in exchange for hybrid cotton from the US.

Nowadays, about one in every six invention patents valid in China covers advanced technologies like artificial intelligence (AI), cloud computing or big data, the China National Intellectual Property Administration said in July. These are all key areas in the China-US technology rivalry.

China also accounted for more than 75 per cent of the global generative AI patents issued in the last two years, publishing over 43,000 patent families, the UN’s World Intellectual Property Organization said in a July report. The country boasts four of the five biggest patent generators in the period – Tencent, Ping An Insurance, Baidu and the Chinese Academy of Sciences. Japan’s SoftBank topped the list with 2,985 published patent families.

Chinese companies have similarly become global leaders in numerous other technology fields, including lithium ion batteries, wind turbines, solar panels, electric vehicles, semiconductor production and rare earths processing.

The growth of China’s tech sector has contributed to legal disputes over the theft of commercial secrets, including cross-border disputes. Last year, Beijing E-Town Semiconductor Technology sued US rival Applied Materials, seeking US$14 million for infringement of trade secrets developed by a US unit. The case is still awaiting trial at the Beijing Intellectual Property Court.

In the US, Beijing Neu Cloud Oriental System Technology had a trade secrets claim against IBM thrown out by a federal court in 2022. The case centred on customer information rather than technology.

There have also been complaints within China about corporate theft. Last August, a Shanghai court imprisoned 14 former Huawei Technologies employees for stealing chip-related business secrets. Sentences as long as six years, as well as fines, were handed down to the engineers, who had worked for the tech giant’s chip development unit HiSilicon.

US and European complaints about Chinese technology theft stretch back decades and across party lines. As far back as 1996, then-US president Bill Clinton, a Democrat, threatened tariffs on US$2 billion of imports from China because of failures to protect American IP.

More recently, Republican Donald Trump made similar complaints in all three of his presidential campaigns. Christopher Wray, the head of the Federal Bureau of Investigation under Trump, described Chinese IP theft as “one of the largest transfers of wealth in human history” in a 2020 speech.

The Trump administration has taken advantage of legislation signed into law by Democrat Joe Biden to help defend US trade secrets. It recently used the Protecting American Intellectual Property Act of 2022 to impose sanctions on five Chinese entities, including a company set up by Ding Linwei. In January, a US court convicted the former Google software engineer on seven counts of stealing trade secrets from the tech giant.

The European Union, meanwhile, has taken China to the World Trade Organization over a range of complaints, including fixing worldwide patent royalties and allowing companies like Huawei and Xiaomi to secure technology licences for as little as half price. The EU has also challenged the practice of Chinese courts barring foreign patent holders from making infringement claims in overseas courts.

More US and European complaints about Chinese technology theft seem inevitable, given China’s rapid advancement and increasingly heated tech competition. Now we can expect some moves in the other direction as well.