Opinion: New Law Lays New Foundation for China’s Private Sector

By Caixin

China has unveiled its long-anticipated Private Economy Promotion Law, a landmark statute passed by the Standing Committee of the 14th National People’s Congress (NPC) on April 30. It is the country’s first foundational law dedicated specifically to developing the private sector. After three readings — in December 2024, February 2025 and April 2025 — the law, consisting of nine chapters and 78 articles, is scheduled to take effect on May 20. It addresses fair competition, investment and financing, technological innovation, operational regulation, service guarantees and the protection of rights.

For the first time, the law formally defines the legal status of the private economy and enshrines its promotion for “sustained, healthy and high-quality development” as a “long-term, major national policy.” Emphasizing equal treatment, fair competition, equal protection and common development, the legislation is designed to offer a strong legal foundation for the high-quality development of the private sector.

This legislative milestone, which drew significant input, extends beyond the survival of private enterprises. It is essential to building a high-level socialist market economy.

China’s official stance on the private sector has gradually evolved — from viewing it as a mere “supplement to the socialist public economy” to recognizing it as an “important component of the socialist market economy.” In recent years, an array of regulatory efforts has sought to protect and develop the private economy, progressively clarifying its legal status and shaping more favorable public perceptions. By codifying past policies and proven practices into law, the central government aims to reinforce societal consensus. The law is designed to both consolidate previous reforms and stabilize expectations, thereby bolstering confidence in the private sector’s future.

True to its name, the law’s preamble sets out its aims: to optimize the development environment for the private economy, ensure equal market access for all types of economic organizations, promote the healthy development of the private sector and its entrepreneurs, and foster a high-level socialist market economy. It underscores the private economy’s critical role in national economic and social development. Notably, it requires financial institutions, guided by market principles and grounded in the rule of law, to provide tailored financial services to small and micro private enterprises, and encourages market-based risk-sharing mechanisms for financing — a direct attempt to address long-standing financing hurdles.

Crucially, the chapter immediately following the general provisions is titled Fair Competition. It mandates a unified national negative list for market access and a formal system to review competition policies. The law further compels governments at all levels to treat private economic entities equally in matters such as fund allocation, land supply, emissions quotas, public data access, licensing, standard-setting, project approval, professional title assessment, awards and human resource policies.

The Service Guarantees chapter calls for lawful administrative conduct that minimizes disruptions to business operations and mandates timely government responses to legitimate concerns. The Rights Protection chapter addresses the safeguarding of operational autonomy, personal rights, and property rights of entrepreneurs. It emphasizes legal procedure in the case of expropriation or asset seizure and introduces new limits on cross-jurisdictional enforcement, explicitly prohibiting abuses of power for economic gain.

To give the law practical force, the Legal Responsibility chapter includes provisions for punishing officials who violate cross-jurisdictional enforcement rules. Local governments that fail to honor policy commitments or legal contracts with private entities may be compelled to make reparations, and responsible officials may be disciplined. If fully enforced, these measures could enhance trust between government and business and reignite private sector dynamism.

Still, passing a law is only the beginning; implementation will be decisive. An official from the NPC Standing Committee’s Legislative Affairs Commission emphasized that the enactment of the law should lead to the development of complementary regulations, coordinated support measures and a legal framework that is systematic, coherent and timely.

As China navigates a cautious economic recovery amid global uncertainty, Beijing is betting that this meticulously crafted law will empower private businesses to strengthen core capabilities, reinforce the industrial foundation and boost competitiveness.

caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.

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