A well-known Chinese business leader recently stated openly that her company does not hire any Chinese graduates or professionals returning from overseas to avoid potential infiltration by spies working for foreign entities.  This remark has been widely criticized for undermining China’s efforts to attract greater numbers of talented individuals with foreign experiences.  While the business leader’s recruitment approach is quite extreme, her underlying concerns about potential loss of trade secrets are noteworthy.  A new set of rules issued by Chinese authorities helps address these concerns by elucidating how individuals stealing trade secrets for foreign entities can be subject to severe criminal punishments.

Business Leader’s Concerns vs. China’s Welcome for Returnees

“[…] Gree had not hired and would not hire Chinese ‘returnees’ from foreign countries because ‘there are spies among them’.”

In late April, during a shareholders’ meeting held by Gree Electric Appliances, Inc., DONG Mingzhu, who has been leading the company since the 2000s, firmly stated that Gree had not hired and would not hire Chinese “returnees” from foreign countries because “there are spies among them”.

These remarks have drawn heavy criticism from commentators and returnees committed to helping advance China’s development.  In addition, the remarks are inconsistent with China’s policies regarding returnees, as best reflected in the Opinions on Further Improving Work Concerning Overseas Students’ Return to Serve the Country (“Opinions”), which was jointly issued in November 2024 by the Organization Department of the Chinese Communist Party as well as nine national authorities, including the Ministry of Human Resources and Social Security, the Ministry of Foreign Affairs, the Ministry of Education, the Ministry of Science and Technology, and the Ministry of Public Security.

The importance of returnees to China’s continued development is emphasized by the opening statement of the Opinions, which reads: “Overseas students are an important part of [China’s] talent resources and an important force [for China] to achieve high-quality development and promote Chinese-style modernization.”  The Opinions ends with this request: “We must strengthen publicity concerning employment and entrepreneurship [opportunities] for returning overseas students and the roles that they can play, share positive stories about returnees, and create a good atmosphere.”

However, the Opinions does state the need to “strengthen political guidance and education on national conditions” offered to returnees so that they will adhere to the “tradition of studying overseas [and returning] to serve the country”.  This statement suggests that while returnees are warmly welcomed, Chinese authorities are taking measures to confirm these returnees’ allegiance.

Criminal Law Amended to Strengthen Protection of Trade Secrets

The amendment to the Criminal Law of the People’s Republic of China in 2020 (became effective in March 2021) represents one of the key steps taken by Chinese authorities to guard against the potential loss of trade secrets to foreign entities.  As a result of this amendment, the Criminal Law has a new provision, i.e., Article 219-1, which states:

Whoever steals, spies on, purchases, or illegally provides trade secrets on behalf of institutions, organizations, or individuals outside the country shall be sentenced to fixed-term imprisonment of not more than five years and be fined or shall be fined only.  If the circumstances are serious, the person shall be sentenced to fixed-term imprisonment of not less than five years and be fined.

[emphasis added]

Article 219-1 should be compared with Article 219, which concerns infringement of trade secrets in situations that do not involve foreign entities.  Article 219 provides:

Where any of the following acts of infringing trade secrets is committed, [the offender], if the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than three years and be fined or shall be fined only; [the offender],  if the circumstances are particularly serious, shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and be fined:

(1) Obtaining the trade secrets of the right holder by theft, bribery, fraud, coercion, electronic intrusion, or other improper means;

(2) […];

(3) […].

[emphasis added]

A comparison of the above two provisions shows two major differences.  First, a person can be held criminally liable under Article 219-1 even if the circumstances are not serious at all.  In other words, a person’s mere act of stealing, spying on, purchasing, or illegally providing trade secrets on behalf of foreign entities is sufficient to lead to the person’s conviction under Article 219-1.

“The latter expression ‘not less than five years’ suggests that, if warranted, life imprisonment can be imposed under Article 219-1.”

Second, while Article 219 provides for two levels of imprisonment, namely, “not more than three years” and “not less than three years but not more than ten years”, depending on how serious the circumstances surrounding the criminal acts are, each of the two levels of imprisonment stated in Article 219-1 is more severe, i.e., “not more than five years” and “not less than five years”, respectively.  The latter expression “not less than five years” suggests that, if warranted, life imprisonment can be imposed under Article 219-1.

New Rules Elucidating the Term “Serious Circumstances”

As, according to Article 219-1 of the Criminal Law, a person’s act of stealing, spying on, purchasing, or illegally providing trade secrets on behalf of foreign entities under serious circumstances can lead to imprisonment of “not less than five years”, it is crucial to understand what circumstances are considered “serious”.

A new set of rules jointly issued by China’s Supreme People’s Court and Supreme People’s Procuratorate in April 2025 elucidates the meaning of this term.  According to these rules, “serious circumstances” as provided for in Article 219-1 exist if, for example, “the amount of loss caused to the right holder of the trade secrets is not less than RMB 300,000”, “the amount of illegal gains due to infringement of trade secrets is not less than RMB 300,000”; or there are “other serious circumstances”—a catch-all phrase that leaves a lot of room for judges’ discretionary power.

All of the above analysis shows that China has already taken preemptive, strong measures to guard against the potential loss of trade secrets to foreign entities.  Instead of avoiding the recruitment of returnees, Ms. Dong Mingzhu and others who echo similar views should provide in-house training programs so that newly-recruited returnees better understand the criminal punishments that they could face if found guilty of spying for foreign entities.  The deterrent effect resulting from such training can be effective, without compromising these companies’ interests in leveraging returnees’ foreign experiences to advance the companies’ developments.

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• The citation of this article is: Dr. Mei Gechlik, Trade Secrets and Criminal Punishments, SINOTALKS.COM^®, In Brief No. 55, Apr. 30, 2025, https://sinotalks.com/inbrief/trade-secret-criminal-english.
  The original, English version of this article was edited by Nathan Harpainter.  The information and views set out in this article are the responsibility of the author and do not necessarily reflect the work or views of SINOTALKS^®. ↩︎

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