Robotic arms process parts and components for automobiles at a Wuling Motors factory in Shandong Province. Photo: IC PHOTO

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The private sector is a key component of the socialist market economy. According to data from China’s State Administration for Market Regulation, by the end of March 2025, there were more than 57 million registered private enterprises nationwide, accounting for 92.3% of the total number of enterprises. Often referred to as the “capillaries” of the Chinese economy, private enterprises play a crucial role in employment, entrepreneurship, and innovation. Scholars argue that the Private Economy Promotion Law, by establishing and refining mechanisms across six key areas—fair competition, investment and financing, technological innovation, standardized operations, service guarantees, and rights protection—will help foster a stable, fair, transparent, and predictable environment for the private sector’s development.

Improving system of socialist rule of law with Chinese characteristics

For many years, regulations governing the private sector in China were scattered across laws such as the Civil Code, the Company Law, and the Law on the Promotion of Small and Medium-sized Enterprises, alongside a wide array of policy documents. This fragmented approach lacked coherence and failed to fully address the systemic barriers impeding the private sector’s development. The Private Economy Promotion Law brings these elements together into a comprehensive legal framework, filling long-standing institutional gaps.

Liang Qinghua, a professor from the School of Law at the University of International Business and Economics, noted that as an important supplement to the current civil and commercial laws and the economic law system, the Private Economy Promotion Law strengthens the legal foundations of the private economy by affirming its constitutional status and introducing mechanisms for fair competition, financing, and technological innovation—directly responding to the pressing needs of private enterprises seeking high-quality development. 

According to Liang, the law will help safeguard the legitimate rights and interests of private businesses and their operators. It reinforces the principle of equal legal standing between private and state-owned enterprises, promoting their joint development within competitive market dynamics. Liang added that the law also clarifies the responsibilities and behavioral norms of state organs and public officials in facilitating the private sector’s development, further enhancing the government’s neutrality in property ownership in areas such as market regulation and project procurement bidding, and optimizing the reasonable limits of government intervention in the market economy. By reducing market access inequalities, addressing inadequate protection of property rights, and upholding an entrepreneurial spirit, the law aims to stabilize institutional expectations and boost enterprises’ development confidence. 

The formulation and implementation of the Private Economy Promotion Law marks a milestone in China’s ongoing efforts to enhance the rule of law for the private sector. By systematically constructing a regulatory framework, it provides institutional guarantees for the sector’s high-quality development and epitomizes deepened reform in socialist rule of law with Chinese characteristics in the new era. 

Wu Shenkuo, a professor from the Law School at Beijing Normal University, emphasized that the law’s foremost contribution lies in its formal recognition of the private sector’s legal status. It offers a contemporary legal articulation of China’s foundational economic system, especially under the strategic framework of Chinese modernization, and institutionalizes the role of private enterprise as a key economic actor. In terms of improving the business environment under the rule of law, Wu noted, the law provides a coherent system covering market access, financing support, innovation incentives, market oversight, and rights protection. It focuses on practical obstacles, aiming to dismantle longstanding implicit barriers and guarantee private enterprises equal access to market opportunities. 

Of particular note, the law innovatively places equal treatment in areas such as market access and policy support under the protection of law. By clearly defining the rights and obligations of all parties, it offers meaningful safeguards for the legitimate interests of private businesses, Wu asserted. The law’s promulgation fuels the continuous improvement of the system of socialist rule of law with Chinese characteristics. This legal empowerment not only strengthens the intrinsic drivers of the private economy but also provides solid support for building a new development paradigm. 

Invigorating private sector across areas 

The Private Economy Promotion Law, the first foundational legislation dedicated to the private sector’s development in China, marks several historic firsts. It is the first law to codify the principle of “unswervingly consolidating and developing the public sector while unswervingly encouraging, supporting, and guiding the development of the non-public sector”—known as the “two unswerving principles”—as well as the goal of “promoting the healthy development of private businesses and the sound growth of private entrepreneurs.” It also formally defines the legal status of the private economy for the first time and establishes the promotion of the sector’s sustained, healthy, and high-quality development as a major, long-term national policy.

“These ‘firsts’ reflect the Party and the state’s profound understanding and sound evaluation of the development laws governing the private sector, as well as systems thinking and strategic arrangements to promote the sustained, healthy, and high-quality development of the sector, fully demonstrating the CPC’s resolve,” Xiao Hongjun, a research fellow from the Institute of Industrial Economics at the Chinese Academy of Social Sciences, told CSST. 

In Xiao’s view, these “firsts” will help build consensus and coordinate action, inspiring society as a whole to deeply recognize the inevitability, necessity, and direction of expanding the private sector, thereby aligning thoughts and actions with the CPC Central Committee’s decision-making and deployment on promoting the high-quality development of the private economy, and forming a powerful collective force across society for the cause. At the same time, they can stabilize expectations and stimulate momentum, boosting the confidence and faith of private enterprises and entrepreneurs, and energizing their efforts to strengthen, grow, and excel. 

By establishing principles of equal treatment, fair competition, equal protection, and shared development, the Private Economy Promotion Law offers comprehensive protection for the legitimate rights and interests of private enterprises and robust legal support for the development of the private sector. Yang Dong, dean of the Law School at Renmin University of China, pointed out that private enterprises are a vibrant force for high-quality development and important pillars for job creation, technological innovation, improvement of people’s livelihoods, increasing fiscal revenue, and social stability. 

Micro, small, and medium-sized enterprises (MSMEs) hold the key to the development of China’s private economy and also constitute a priority for economic transformation and upgrading, Yang said, highlighting that the Private Economy Promotion Law provides legal guarantees for MSMEs and can encourage them to actively embrace digitalization.

Breakthroughs and innovations

The Private Economy Promotion Law also embodies the government’s concern for private enterprises through multiple significant breakthroughs and innovations. Chen Bing, deputy dean of the School of Law at Nankai University, explained that the law clarifies the equal legal status of private economic organizations to their counterparts through specialized legislation. It implements a nationally uniform negative list system for market access, ensuring fair participation of private economic organizations in market competition and striving to break down long-standing implicit barriers. 

To address persistent challenges such as limited and costly access to financing, the law outlines various measures to improve the investment and financing environment. It also promotes the development of a market-oriented risk-sharing mechanism, providing stronger financial support to private firms, Chen continued. Underscoring technological innovation, the law supports private economic organizations to increase research and development investment, focus on breakthroughs in core technologies in key fields, and build technological innovation systems that are enterprise-led, market-oriented, and characterized by close collaboration between industries, universities, and research institutes. In addition, the law reinforces service guarantees and rights protection, explicitly requiring governments at all levels to enhance service efficiency through legislation, cultivate a close and clear relationship with businesses, ensure the legal rights and interests of private economic organizations and their operators are protected by law, and refine the corporate rights protection and relief mechanisms to enhance the sense of security and confidence among private entrepreneurs.

These breakthroughs and innovations embody China’s commitment to implementing the “two unswerving principles,” creating a stable, transparent, and predictable institutional environment for the private sector, stimulating market vitality, and driving high-quality economic development, Chen said. He believes that the Private Economy Promotion Law’s aim to comprehensively fuel the growth of the private economy reflects the Party and the state’s consistent support for this sector. At the same time, it adheres to a government service-oriented approach, emphasizing the equal importance of regulation and service, and legally safeguarding the legitimate rights and interests of private enterprises. 

The law also underscores innovation-led development, encouraging private firms to lead major research projects, strengthen the integration of industry, education, and research, and intensify efforts to achieve breakthroughs in core technologies in key fields. It focuses on resolving persistent investment and financing bottlenecks, improving financial support mechanisms, and promoting the development of diversified financial products and risk-sharing systems. At the same time, it calls for better corporate governance, strengthened compliance, and enhanced safeguards against corruption and operational risks, ultimately boosting firms’ quality and resilience, Chen said. 

 

The implementation of the Private Economy Promotion Law marks a new stage in enhancing the rule of law for China’s private sector. It provides powerful guarantees for the private economy across multiple dimensions, boosting confidence and injecting momentum into the development of private enterprises. It not only responds directly to the sector’s pressing needs but also highlights the country’s high regard and strong support for the private economy. Looking ahead, with the implementation of the Private Economy Promotion Law, the private sector is poised to achieve high-quality development under a sound legal framework. 

Edited by CHEN MIRONG