China's new private sector law: Recalibrating the growth model

Editor's note: Imran Khalid, a special commentator on current affairs for CGTN, is a freelance columnist on international affairs. The article reflects the author's opinions and not necessarily the views of CGTN.    

China's decision to codify protection and incentives for its private sector through the new private sector promotion law marks a significant step forward. At a press conference held by the State Council Information Office on May 8, officials emphasized the government's plans to involve private capital in major national projects.

Notably, private investors now hold up to 20 percent equity in some nuclear power projects, and in sectors like industrial equipment upgrades and recycling, private capital accounts for more than 80 percent of total investment. It signals a potentially profound shift in Beijing's attitude toward its private enterprises.

More than legal codification, the law represents a strategic recalibration of the Chinese growth model – one that reaffirms the essential role of private capital, innovation and entrepreneurship in the country's next phase of development.

The law, which will take effect on May 20, is China's first national-level legislation explicitly dedicated to the private economy, coming at a pivotal moment. Over the past few years, the private sector has been strained by a combination of pandemic-era restrictions and an increasingly uncertain global business environment. In this environment, the new law sends a message  of reassurance, stability and strategic inclusion.

It recognizes the private sector as not only a permanent fixture of the Chinese economy, but a priority in national policymaking. It commits to ensuring equal access to markets, fair competition, legal protections for property rights and financial support tailored to the needs of private firms. These promises are not rhetorical. They have now been codified into law.

This is no small matter. In China, legal codification serves both as a statement of policy intent and a signal to local governments, regulators and investors. For entrepreneurs who have spent the past few years managing shifting political winds, this level of clarity matters deeply.

Take, for example, the law's emphasis on equitable access to financing. One of the chronic challenges facing China's private firms, especially small and medium-sized enterprises, has been the difficulty in obtaining credit. The new law mandates financial institutions to strengthen credit support for the private sector.

In practice, this means new credit facilities, more active private equity funding and increased support for mergers and acquisitions in high-tech sectors. These are the tools that translate legal declarations into economic reality.

Another important feature is the law's endorsement of private participation in major national projects. In the past, infrastructure and strategic industries – from nuclear energy to advanced manufacturing – were tightly controlled by state capital. Now private investors are being invited to take equity stakes, in some cases up to 20 percent. This is not just about the diversification of capital; it is about changing the structural relationship between the state and the market and creating space for the private sector to contribute to national priorities as a trusted partner.

The timing of this shift is telling. External pressures, particularly from the United States and its allies, have made technological self-reliance and domestic demand more urgent than ever.

In recent months, Chinese President Xi Jinping has met with private business leaders, emphasizing their role in achieving the country's modernization goals. This is a recalibration to strike a better balance between control and creativity, between political stability and economic vitality.

In a global context where economic nationalism is rising and many governments are retreating from market principles, China's reaffirmation of the private sector's value is notable. It is not liberalization in the Western sense. But it is a pragmatic response to domestic challenges – the recognition that without a confident, thriving private sector, China's aspirations for high-quality development will remain unfulfilled.

The private economy promotion law is best understood not as an evolution of China's political model, but as an evolution within it. It seeks to harness the dynamism of private enterprise while retaining the guiding hand of the state. It will certainly restore confidence among entrepreneurs, catalyze innovation and chart a new course for sustainable growth.

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