China's top legislative body passed the private sector promotion law on Wednesday, which will take effect on May 20, 2025.
The landmark legislation is set to significantly influence the development of China's private sector, contributing to the sustaining of high-quality growth in the world's second-largest economy amid growing external uncertainties.According to the Legislative Affairs Committee of the National People's Congress Standing Committee, the enactment of the law is not just a response to the current economic situation but an important action to strengthen the socialist market economy.
The law aims to foster a more stable, fair and transparent environment for private businesses, stimulate the development of private enterprises, and encourage entrepreneurs to contribute more actively to China's economic and technological growth.Comprising 78 articles in nine chapters, the law covers a broad range of issues critical to the development of China's private economy.
It begins by establishing the guiding principles for promoting the private economy, recognizing the sector as a vital component of the socialist market economy.
The law emphasizes that private businesses play a great role in Chinese modernization, underlining the importance of allowing the market to play a decisive role in resource allocation while ensuring the government's active support.
It also explicitly states that promoting the private sector's sustained, healthy and high-quality development is a long-term major national policy.A key chapter of the law is its focus on ensuring fair competition.
It requires that private businesses, along with other economic entities, have equal access to all sectors of the economy, except those specifically restricted in the negative list.
Additionally, the law mandates the implementation of a fair competition review system, ensuring that market entry barriers are regularly reviewed and removed.
These provisions are designed to create a level playing field for all businesses and eliminate discriminatory practices that have previously hindered private enterprises.Another significant aspect of the law is its emphasis on optimizing the investment and financing environment.
The law seeks to improve the conditions under which private businesses can operate by lowering institutional transaction costs and enhancing access to capital.
It encourages private enterprises to participate in major national projects.
The law also calls for improved financial services, including better access to capital markets and a more diversified financing system.In addition to financial support, the law recognizes the critical role of technological innovation in driving private sector growth.
It explicitly supports capable private enterprises in leading national technology research and development projects.
The law also facilitates access to major national scientific research infrastructure for private companies and strengthens intellectual property protections, all aimed at fostering an environment where innovation can flourish.The law also seeks to regulate and guide the development of private capital by promoting good governance practices.
It encourages private enterprises to establish solid governance structures, improve their financial systems and implement anti-corruption measures.
These provisions aim to ensure that private businesses are managed effectively and responsibly, helping them to grow sustainably.Government support is another key element of the law.
It establishes mechanisms for better communication between private enterprises and government bodies at all levels and stipulates that regulatory frameworks should align with business needs.
It mandates efficient administrative practices, including the elimination of arbitrary fees, fines and inspections.
The law also provides provisions for improving talent incentives, facilitating business-related procedures and ensuring the protection of business contracts and payments.The seventh part of the law guarantees the protection of the legal rights of private enterprises, including their personal, property and operational rights.
It prohibits unlawful government actions such as unjustified charges, fines or forced contributions and ensures that private businesses can operate without undue interference.
The legal protection aims to provide a secure and predictable environment for business operations, encouraging more private investment.China's private enterprises contributed over half of China's foreign trade and tax revenue in 2024 while accounting for more than 80 percent of urban employment.
More importantly, they are playing a major role in sharpening the country's innovation edge, generating over 70 percent of China's technology innovation achievements.The law passed on Wednesday was timely for China's economy, which faces increasing impact from external shocks.
Boosting the private sector, a heavyweight in manufacturing, the digital economy, green tech and many other fields, is seen as essential to consolidating the country's sustained economic recovery.(With input from Xinhua)