China’s top legislative body has passed a groundbreaking private sector promotion law, set to take effect on May 20, 2025. This landmark legislation is poised to significantly impact the development of China’s private sector, bolstering sustainable, high-quality growth amid global uncertainties.
The law, comprising 78 articles in nine chapters, underscores the importance of the private sector in the socialist market economy. It recognizes private businesses as vital drivers of modernization, emphasizing the need for a stable, fair, and transparent environment where they can thrive.
A key focus of the law is ensuring fair competition. It mandates equal access for private enterprises to all sectors of the economy, except those specifically restricted. By implementing a fair competition review system, the law aims to dismantle barriers and eliminate discriminatory practices, creating a level playing field for all businesses.
The legislation also seeks to enhance the investment and financing environment for private businesses. By lowering transaction costs and improving access to capital, it encourages private enterprises to participate in major national projects. The law promotes better financial services, including easier access to capital markets and diversified financing options.
Supporting technological innovation is another major aspect of the law. It backs capable private enterprises in leading national research and development projects, provides access to significant scientific research infrastructure, and strengthens intellectual property protections. These measures are designed to foster an innovative environment where new ideas and technologies can flourish.
The law encourages good governance practices within private enterprises, promoting solid management structures and anti-corruption measures. It also outlines government support mechanisms, ensuring efficient administrative practices and eliminating unnecessary fees and inspections. By safeguarding the legal rights of private businesses, the law ensures they can operate without undue interference.
China’s private enterprises contribute significantly to the economy, accounting for over half of the country’s foreign trade and tax revenue in 2024, and providing more than 80% of urban employment. They play a crucial role in advancing technological innovation, generating over 70% of China’s technological achievements.
This new law comes at a pivotal time as China’s economy faces external challenges. By strengthening the private sector—a powerhouse in manufacturing, digital economy, green technology, and more—the legislation is essential for consolidating sustained economic recovery.
