Non-Compete Restrictions in China: Insights from Beijing’s Latest Cases

On 29 July 2025, the Beijing No. 1 Intermediate People’s Court held a press conference where it released six typical cases involving non-compete disputes and reported on the court’s handling of such matters. According to the circular, in recent years the number of non-compete cases heard by the Court has been increasing. Alongside this growth, new problems have emerged, including vague understandings of the essence of non-compete obligations, biased views on competitive relations, increasingly hidden forms of employee avoidance, and excessively high liquidated damages agreements.

The Court’s release of typical cases aims to spotlight frequent areas of dispute in non-compete litigation and to promote governance through case law. The selected cases focus on issues such as: determining whether an employee falls within the scope of non-compete obligations; the validity of compensation paid during employment; whether liquidated damages must be paid for breach; and the methods by which non-compete obligations may be terminated. The judgments reflect mainstream judicial thinking while also incorporating responses to the evolving needs of society and innovation.

1. Determining the Scope of Non-Compete Personnel: A Higher Burden of Proof for Employers

(1) Typical case
In Case 1, Yang, a lecturer at Company A, signed a “Confidentiality and Non-Compete Agreement” requiring him to observe a two-year non-compete after resignation. After leaving, Yang joined another training provider in a similar role. Company A claimed Yang had access to trade secrets. The court found otherwise: Yang’s teaching materials were publicly available, he had not received special training, and no evidence showed he possessed confidential information of economic value.

The judge emphasised that while the Labor Contract Law allows employers to designate non-compete personnel, this cannot be extended indiscriminately. If the employer alleges that an employee is bound by confidentiality obligations, the employer must prove the employee had access to trade secrets or confidential information. Courts will review both whether the information qualifies as a trade secret and whether the employee’s role, tasks, income, and tenure made it likely they had access to such secrets.

(2) Commentary
Courts generally conduct a substantive review rather than simply accepting contractual designations of non-compete status. Historically, the threshold has been low—based on job position and duties—without deep scrutiny of whether the knowledge truly meets the three elements of a trade secret: confidentiality, value, and secrecy under the Anti-Unfair Competition Law.

This case is notable because the Court expressly required proof that the employee had access to confidential, valuable, and secret information, placing the evidentiary burden on the employer. The reasoning is consistent with Article 13 of the Supreme People’s Court’s Interpretation (II) (effective 31 July 2025), which provides that non-compete clauses may be invalid if employees had no access to trade secrets or if the clause extends beyond reasonable scope.

The ruling highlights the risks of overgeneralisation in practice, where some employers require all staff to sign non-compete agreements. This approach undermines employment security and labour mobility. Employers should be prepared to substantiate claims with evidence. At the same time, courts should avoid relying solely on whether employers prove the three elements of a trade secret, since confidentiality obligations can also extend to other forms of intellectual property-related information under Article 23 of the Labor Contract Law.

2. Determining Competitive Relations: Beyond the Contractual List

(1) Typical case
In Case 2, Li, a senior product manager at Company B, was barred from joining firms in the “traditional automotive industry and Internet car manufacturing” within six months of resignation. The agreement listed specific competitors. Li’s new employer was not on the list, but the Court ruled there was still a competitive relationship because the new company developed intelligent cockpit systems overlapping with Company B’s business.

The judge clarified that whether non-compete obligations are breached cannot be determined solely by reference to a contractual list of competitors. Courts will assess factors such as business scope, operations, market positioning, and target customers. Even if a new employer is not listed, competition may still exist. Conversely, a listed company may not qualify if no substantive competition is present.

(2) Commentary
Many employers attempt to control risk by including exhaustive competitor lists in non-compete clauses. Courts, however, prioritise substantive assessment of actual business overlap.

Past rulings focused heavily on business scope, but as industries become more specialised, overly broad categories such as “software and IT services” provide insufficient clarity. Courts increasingly refine their analysis to assess actual operations, markets, and customer bases.

This trend is reflected in Supreme People’s Court Guiding Case No. 190 (Wang Shan v. Wind Information Technology), where the Court ruled that despite overlapping registered business scopes, no real competition existed between a financial information provider and a cultural video platform.

Employers should therefore prepare evidence demonstrating overlap in business operations, customer groups, products, and markets, recognising that courts will not rely solely on registration documents or pre-agreed lists.

3. Economic Compensation: Treated as a Single Debt, Limitation Period Runs from Expiry

(1) Typical case
In Case 4, Wu signed a non-compete agreement with Company D, but no terms were agreed on the timing or standard of compensation. After dismissal in April 2021, Company D neither waived Wu’s obligations nor paid compensation. Wu filed for arbitration in September 2022. The employer argued that claims prior to September 2021 were time-barred. The Court disagreed, holding that non-compete compensation is a single continuous obligation.

Article 189 of the Civil Code states that where a debt is performed in instalments, the limitation period runs from expiry of the last instalment. By analogy, the limitation period for claiming unpaid non-compete compensation runs from the end of the entire non-compete term, not each missed monthly payment.

(2) Commentary
The Court treated monthly compensation not as multiple debts but as a single debt arising from restriction of employment rights. Consequently, employees may claim unpaid compensation at the end of the non-compete period.

This raises questions about reciprocity: if compensation is treated as a single debt, should employers be entitled to reclaim all paid compensation if the employee breaches obligations at any point? Article 15 of the Supreme People’s Court’s Interpretation (II) suggests yes, provided the agreement stipulates full repayment upon breach. Some courts, however, have pro-rated repayment according to the duration of violation. It remains to be seen whether Interpretation (II) will unify standards in practice.

4. Other Observations

The other three cases reaffirm existing principles:

• Case 3: Non-compete compensation must be paid monthly after termination of employment and cannot be included in wages during employment.

• Case 5: Failure to comply with ancillary reporting obligations does not by itself constitute a breach of non-compete obligations.

• Case 6: Employers may unilaterally release employees from non-compete obligations through notice (written or oral), without requiring employee consent.

Conclusion

In today’s context of digital economy and industrial transformation, tensions between the free movement of talent and the protection of trade secrets will continue. Non-compete arrangements are likely to become more diverse, requiring judicial practice to adapt dynamically. Only by refining doctrine and balancing interests can the non-compete system remain aligned with both corporate needs and broader social interests.

Anjie Broad, China, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact china@transatlanticlaw.com

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 84 Brook Street, London W1K 5EH, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.