Shift from policy-based support to legal protection for private firms

The central authorities deliberated on the private sector promotion law — which the country's top legislature passed a few days ago — at a news conference on Thursday. The law, which will come into effect on May 20, covers such aspects as fair competition, investment and financing promotion, scientific and technological innovation, regulatory guidance, service support, rights and interests protection and legal liabilities.

The enactment of the law was a watershed moment for China, signaling a decisive shift from policy-based support to institutionalized legal protection for private enterprises. The law is a comprehensive response to long-standing challenges faced by China's private economy.

The legislation creates enduring institutional safeguards for the private sector, which accounts for more than 50 percent of the tax revenue, more than 60 percent of GDP, more than 70 percent of technological innovation achievements and more than 80 percent of urban employment. By enshrining principles of equal treatment, fair competition and property rights protection into law, the Chinese government has addressed longstanding grievances of private entrepreneurs while laying the foundation for more sustainable and innovation-driven growth.

As the world's second-largest economy navigates technological decoupling, demographic shifts and the transition to high-quality growth, this legal framework provides both stability for domestic businesses and reassurance for international investors about China's continued commitment to market-oriented reforms.

The law arrives at a critical juncture when China's private sector, despite its remarkable contributions to economic growth, job creation and technological innovation, is facing structural barriers such as unequal access to financing, regulatory uncertainties, market entry restrictions and concerns about property rights protection. By systematically addressing these challenges, the new law aims to unleash the full potential of private enterprises. Its implementation will be closely watched as a test case for China's ability to balance State guidance with market forces in its distinctive socialist market economy.

One of the breakthroughs of the law lies in its robust provisions for protecting private property rights and entrepreneurs' legitimate interests — long a source of anxiety for China's business community. The law establishes clear boundaries against arbitrary government interference in private enterprise operations, explicitly prohibiting the administrative or criminalization of economic disputes and strictly regulating measures such as property seizures and account freezes. These protections directly address what Chinese scholars have termed the "institutional insecurity "that has hampered private sector investment and expansion plans.

The law pushes for market equality. Private companies have long complained of "glass doors" — visible opportunities that remain out of reach due to hidden bureaucratic hurdles. If implemented effectively, this could unleash a wave of innovation, particularly in tech and green industries where private companies have been more dynamic than State players.

By creating an enabling environment for private enterprises to thrive, China is not only strengthening its domestic economic resilience but also sending a clear signal to the global market about its determination to maintain open, predictable and rules-based economic governance. This dual focus on internal reform and external confidence-building positions China as a stabilizing force in today's volatile economic landscape.