(file photo)

Police in Guiyang, capital of Southwest China's Guizhou Province announced on Tuesday that they have arrested a former employee of Laoganma Co, the producer of China's most famous chili sauce, on suspicion of leaking the firm's commercial secrets.

According to a statement the Nanming district police sent to the Global Times on Tuesday, Laoganma workers found products extremely similar to the company's signature sauce being sold in May 2016, and reported their suspicions to Police on November 8, 2016.

Police investigators have verified that the knockoff chili sauce was made with Laoganma's secret techniques, and confirmed that someone illegally leaked the company's commercial secrets.

They arrested the suspect, surnamed Jia, in February and found Laoganma business secrets on his hard drive, police said.

The statement said that Jia held a number of positions at the Nanming-based Laoganma from 2003 to April 2015 including that of a quality examiner and engineer.

During this time, he apparently learned some of the company's core secrets including their proprietary technology and production process.

While he was working there he signed a confidentiality contract promising he would never reveal any business secrets nor get involved with a similar company after leaving Laoganma.

Jia started working for the local food processing firm in November 2015 using a fake name.

By sharing major commercial secrets, Jia has caused up to 10 million yuan ($1.4 million) in damage to Laoganma, said the statement.

According to China's Criminal Law, Jia could be sentenced to up to 7 years in prison for stealing the trade secrets and causing harm.

It is not clear if the firm which manufactured the knockoff chili sauce will also face criminal charges.

Laoganma Co has grown quickly over the past 20 years. In 2016, its sales reached 4.5 billion yuan, the Guizhou Daily, a local newspaper, reported in February. It is also very popular in the overseas market.

In a previous case brought against a chili sauce firm based in Central China's Hunan Province in 2001, the Beijing High People's Court ruled that other similar products could not use the "Laoganma" brand, nor imitate the Nanming Laoganma's package design.

Nanming Laoganma received 400,000 yuan in compensation from the accused, according to cqn.com.cn, a website administered by the General Administration of Quality Supervision, Inspection and Quarantine.

Tinci Materials Technology Co, a Guangzhou-based materials company, reportedly claimed a total of 150 million yuan in compensation from its former employees who founded a firm to produce knockoffs, the Nanfang Daily reported in September 2016.