摘要：The new Private sector promotion law, which comes into effect on Tuesday, is China's first fundamental legislation specifically fo

By Liu Chunsheng

The new Private sector promotion law, which comes into effect on Tuesday, is China's first fundamental legislation specifically focused on the development of the private economy.

China's private sector has played a pivotal role in its economic development. The economy withstood pressure and maintained stable growth in April. According to the National Bureau of Statistics, retail sales of consumer goods experienced a 5.1 percent year-on-year increase in April, exceeding 3.7 trillion Chinese yuan ($515.6 billion).

Furthermore, China's private economy contributes about half of the country's tax revenue, over 60 percent of GDP, and more than 70 percent of technological innovations. It is responsible for upwards of 80 percent of urban employment and over 90 percent of market entities.

From the global reach of the Yiwu small commodities market in Zhejiang in east China to telecom giant Huawei's pioneering role in 5G, from BYD's breakthroughs in new energy vehicles to technology company DJI's leading position in drone manufacturing, private enterprises have consistently driven China's economic transformation.

However, persistent challenges, often termed the "five barriers," continue to hinder the sector's growth. These are implicit market entry restrictions, financing disparities, tensions between innovation and regulatory compliance, intensified global competition, and inconsistent administrative enforcement. The new law will tackle these structural challenges by embedding solutions within a stable legal and institutional framework.

A full-cycle legal safeguard

The law formalizes a unified nationwide negative list system, mandating equal entry for private capital in non-restricted sectors. This landmark reform removes longstanding institutional barriers, enabling private enterprises to operate on an equal footing with state-owned counterparts across industries.

In parallel, a fair competition review mechanism requires governments at all levels to eliminate preferential policies based on ownership structure. Moreover, the law's anti-monopoly clauses specifically target administrative overreach, such as when local governments invoke "safety regulation" to justify exclusive privileges for state-owned monopolies – thereby curbing distortions that undermine market fairness.

To resolve financing disparities across regions, industries and business scales, the law introduces a suite of tailored support mechanisms. A dedicated science and innovation fund channels early-stage investment into frontier fields like artificial intelligence and quantum computing technologies, fostering breakthroughs at the cutting edge of research.

The introduction of intellectual property-backed lending enables firms to use intangible assets as collateral, reducing dependence on traditional fixed assets. In addition, by raising the non-performing loan threshold for micro and small enterprises from 2 percent to 3 percent, regulators signal a more flexible approach, encouraging banks to support high-potential but higher-risk startups.

The law also addresses the concerns of modern business dynamics by introducing specific clauses for emerging technologies and business models. This forward-thinking approach acknowledges the need to balance regulation with innovation, allowing new ventures to experiment without immediate legal repercussions.

To safeguard property rights, the law strictly limits asset seizures to necessary cases, ensuring that entrepreneurs' investments remain protected. It also mandates local governments to honor prior contracts even after leadership transitions, enhancing legal stability. These comprehensive measures work in tandem to stabilize Long-term expectations for private investors, signaling China's commitment to a predictable, investor-friendly business environment.

An assembly line at a Xiaomi plant in Beijing, China, March 25, 2024. [Photo/Xinhua]

Long-term significance

The private sector promotion law marks China's shift from policy-driven to rule-based economic governance. Rather than merely resolving short-term obstacles, it establishes mechanisms to ensure equitable access, foster innovation and uphold the rights of private businesses. By embedding systemic safeguards and openness, this law not only strengthens domestic investor confidence but also offers a uniquely Chinese approach to global economic governance.

Meanwhile, the law has effectively dispelled rumors and misunderstandings about China's private economy propagated by Western countries. It clearly affirms that the private economy is an important component of the socialist market economy and a "vital force in advancing China's modernization," underscoring with legal authority the state's long-term commitment to promoting its sustained, healthy and high-quality development.

As the synergy between technology and finance deepens, private enterprises are well-positioned to play a central role in shaping Chinese modernization. The implementation of the new law is expected to catalyze three major transformations across the sector.

First, the focus will shift from sheer expansion to high-quality development. With stronger backing for technological innovation, more "invisible champions" will be nurtured. For example, a private aerospace enterprise – now licensed to build low-orbit satellite constellation under the new law – is preparing to launch its first batch of satellites. This case demonstrates how a more robust legal environment is unlocking the private sector's capacity for innovation and enabling breakthroughs in cutting-edge industries.

Additionally, the private sector is expected to evolve from a domestically focused model toward a more globalized presence. Leveraging opportunities under the Belt and Road Initiative, private firms will enhance their international competitiveness. As a result, they will secure a more stable position in global industrial chains, with significantly strengthened capabilities to participate in cross-border trade, investment and competition.

Last but not least, the private sector is set to move from passive compliance to active leadership. By aligning more closely with national development priorities, it will become the main force of new productive forces. Private enterprises will play a larger role in emerging fields such as the digital economy, green energy and biomedicine, thereby fueling high-quality development of the Chinese economy.

The enactment of the law not only provides institutional safeguards for millions of private enterprises but also sends a clear message to the world: China is committed to unleashing the full potential of its most dynamic economic engine through the rule of law.

Liu Chunsheng, a special commentator on current affairs for CGTN, is an associate professor at the Beijing-based Central University of Finance and Economics.

来源：中国网一点号