China’s top legislative body passed the Private Sector Promotion Act on Wednesday, establishing legal support for stable and healthy growth in a vast sector, including over 57 million private companies and over 100 million self-employed people.
As China’s first fundamental law dedicated to the private sector, the new law builds trust among vast communities by improving the business environment, promoting innovation and ensuring fair competition.
A strong shot with peace of mind
China’s socialist market economy operates under a framework in which public ownership, as revealed by entities such as state-owned enterprises, coexist with multiple forms of ownership. The private sector, including private companies and individual businesses, is a key component of the non-public economy.
The new law sets out the legal doctrine of “unshakable integration and development of the public sector, promoting, supporting and mentoring the development of the non-public sector.” He also explicitly states that promoting sustainable, healthy and quality development in the private sector is a major long-term national policy.
This is the first time these principles have been codified, and will provide strong legal protection to private companies, according to Yang Heqing, a legislative committee official of the National Congress Standing Committee.
“The law reflects China’s clear stance and solid resolve to support private sector growth,” said Li Min, deputy director of the National Development Commission’s Private Economic Development Bureau.
Passing the law has been warmly welcomed by many entrepreneurs.
The law translates policy support into legal guarantees, giving entrepreneurs greater security and motivation to continue moving forward.
“The rule of law is the best business environment,” Qi said.
All-around target promotions
The legislation directly aims at some of the biggest challenges faced by private companies, with specific mandates to address key community concerns.
From ensuring access to fair markets and opportunities for funding to raise funds, to enhancing services and standardized operations, the Act provides concrete measures to encourage, support and guide private sector growth.
“The law adopts a problem-oriented approach,” Yang pointed out. Because both external factors and weak internal links affecting private sector development are considered.
By incorporating lessons from past reforms and work experience, the law refines relevant institutions and measures and ensures coordination with existing laws, Yang said.
A veteran entrepreneur, Qi emphasized that long development cycles focus on private sector scientific innovation and promotion, which is important for sectors like cybersecurity, where long development cycles require stable cash flow.
China has in recent years stepped up efforts to support more financial support to the private sector, most of which are small and medium-sized enterprises (SMEs). As of the end of March, the outstanding amounts of comprehensive micro and small loans had increased by 12.2% year-on-year, while technology-based small and medium-sized enterprise loans had increased by more than 20%.
The big role to play first
The legislation is timely for the Chinese economy and faces an increase in the impact of external shocks. Boosting the heavyweight private sector in manufacturing, digital economy, greentech and many other sectors is considered essential to consolidating the country’s sustained economic recovery.
In 2024, private companies contributed more than half to China’s foreign trade and tax revenue, accounting for more than 80% of urban employment. More importantly, they play a major role in honing the country’s innovation advantage, producing more than 70% of China’s technological innovation outcomes.
“The private sector is an important force in promoting China’s modernization and serves as an important foundation for the quality development of the Chinese economy,” said Sheng Laiyun, deputy director of the National Bureau of Statistics.
The private sector in China has recently measured positive growth momentum and has reflected the overall upward economic trajectory.
In the first quarter (first quarter), approximately 1.98 million new private companies were registered nationwide, showing an increase of 7.1% year-on-year, surpassing the average growth rate over the past three years. Private sector investments reversed a decline from the previous year by increasing by 0.4% annually in the first quarter.
Official data released on Wednesday showed that business trust in Chinese manufacturing and services companies remained strong, measuring the index measuring business expectations in the expansion territory in April.
Qi said the company will focus on tech companies doing their best. Innovation, industrial upgrades, global competition. “We are now in a better position to be more creative, competitive and responsible driving forces in this new era.”
MNA