The Standing Committee of the National People's Congress (NPC) said on its website that it is examining a proposal on the "Protection of Heroes and Martyrs Law" in order to "promote the spirit of heroic martyrs and patriotism."
Since President Xi Jinping took office in 2012, he has stressed a drive to infuse every aspect of Chinese education with "patriotic spirit" in a campaign to strengthen the legitimacy of the ruling Communist Party.
The NPC approved legislation last month to punish anyone who disrespects the national anthem with up to three years in prison.
The new draft law makes entities such as public security bureaus and internet operators responsible for protecting the reputation and honour of heroes and martyrs, the official Xinhua state news agency reported.
It stipulates they must handle information that may infringe on this duty in a timely matter, Xinhua said.
The NPC discussed related legislation during its annual meeting this March, but the previous proposal focused on civil liability, whereas the latest draft mentions criminal consequences.
"Those who appropriate, damage or contaminate memorials, and insult or slander heroes and martyrs, may receive administrative penalties from public security or even criminal sanctions," the draft reads, according to Xinhua.
Last month, China's ubiquitous "dancing aunties" were ordered to not congregate in "solemn places like martyrs' cemeteries."
And in June of last year, a Chinese court ordered an apology from Hong Zhenkuai, editor of an influential magazine, for questioning the official story of the "Five Warriors of Mount Langyashan," touted as patriotic heroes for jumping off a cliff rather than surrendering to the Japanese during World War II.
The Beijing Xicheng District People's Court ruled that Hong had "tarnished [the warriors'] reputation and honour.
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