China's private economy enters new era as landmark law takes effect

A landmark legislation aimed at bolstering China's private sector took effect on Tuesday, codifying principles of equality and fair competition in a bid to address long-standing concerns among the country's entrepreneurs.

The Private Economy Promotion Law, enacted after months of deliberation, underscores the government's commitment to "equal treatment, fair competition, and common development" for private enterprises, which account for over 90 percent of China's corporate entities. With 26 explicit references to "equality," "fairness" and "equal protection," the law seeks to dismantle systemic barriers that have limited private firms' access to markets, resources and opportunities.

Central to the legislation is its emphasis on creating a level playing field. Data from China's State Administration for Market Regulation reveals that as of March 2025, privately owned enterprises numbered over 57 million, accounting for 92.3 percent of all registered businesses, while self-employed individuals exceeded 125 million. Despite their numerical dominance, private firms have long faced institutional challenges in sectors like energy, finance, and infrastructure. The new law mandates equal legal status and development rights for all market entities, prohibiting unfair treatment in market access, public procurement and financing.

The move was a strategic choice designed to address economic pressures in China, said Li Xin, deputy head of an enterprise research institute at Shandong University of Finance and Economics.

"With the global economy still shaken by complex conditions and lingering effects of tariffs imposed by the U.S., there's an urgent need to stabilize expectations. Using legal measures to regulate government actions both aligns with WTO rules and gives private enterprises compliant frameworks for international competition," Li told Dazhong Daily, a local media outlet.

Market access reforms form another pillar of the legislation. By formalizing the negative list mechanism, which permits private investment in all sectors not explicitly restricted, the law aims to dismantle invisible barriers. Multiple provincial governments have already announced plans to revise local regulations to comply with the law, with Zhejiang Province, an innovation hub, launching several high-quality projects in the energy and transportation sectors to attract private investment.

Liu Yonghao, chairman of animal feed producer New Hope Group, hailed the changes, noting that the mechanism would enable "more liberated participation" for private capital. "The legal backing gives us reassurance to expand investments, especially in emerging industries," he said.

Innovation incentives also feature prominently in the law, reflecting private enterprises' outsized role in China's technological ambitions. Official statistics indicate private firms contribute 70 percent of the nation's patented innovations, 80 percent of "little giants," novel elites of China's small and medium-sized enterprises, and 90 percent of high-tech enterprises. The legislation encourages private capital to flow into advanced manufacturing, artificial intelligence and green energy, sectors deemed critical to cultivating "new quality productive forces."

Qi Xiangdong, chairman of cybersecurity company Qi-Anxin Technology Group, said the law's guarantees on intellectual property protection and research and development support would help tech firms "compete globally without hesitation."

The legislation also addresses modern business dynamics by introducing specific provisions for cutting-edge technologies and innovative business models. "This forward-thinking approach acknowledges the need to balance regulation with innovation, allowing new ventures to experiment without immediate legal repercussions," Liu Chunsheng, an associate professor at the Beijing-based Central University of Finance and Economics, noted in a CGTN opinion piece.

The law's implementation aligns with broader efforts to integrate private enterprises into China's economic modernization blueprint. Official data highlights that private businesses contribute over 60 percent of GDP and 80 percent of urban employment, underscoring their indispensable role in sustaining growth and social stability.

"This legislation fundamentally alleviates the 'identity anxiety' facing the private economy, fully demonstrating the country's high regard for and unwavering support of private enterprises and providing a solid institutional guarantee to stabilize expectations and bolster confidence," said Nan Cunhui, chairman of Zhengtai Group, a low-watts electric equipment maker.