Business leaders in China have welcomed the enactment of the Private Sector Promotion Law, calling it a genuine confidence booster.

Zhang Hui, CEO of Full Truck Alliance in Jiangsu Province, is one such leader. He believes the law, which grants the private sector equal status and systematically addresses key obstacles facing private enterprises, is both timely and necessary. It reflects the authorities’ clear commitment to supporting this vital sector. “With legal protection, private companies can now be more ambitious, and we must also rise to meet these new expectations,” he said.

Enacted on 20 May, the legislation is China’s first fundamental law specifically dedicated to the development of the private sector. It plays a key role in safeguarding the rights and interests of entrepreneurs while promoting healthy and sustainable growth.

The law establishes a robust framework for fair competition, a favourable investment and financing climate, support for technological innovation, and the legal protection of economic rights. It encourages complementarity and joint development among various forms of ownership, a move that has already boosted private sector confidence.

Cornerstone of development

Statistics show that the private sector is the cornerstone of China’s socio-economic development: it accounts for over 50 percent of tax revenue, over 60 percent of GDP, over 70 percent of scientific innovations, and over 80 percent of employment. By the end of March, China had over 57 million registered private enterprises, representing 92.3 percent of all economic entities.

It took just 18 months to pass the law, from its conception to adoption. Zhou Chun, associate professor at the Guanghua Law School, Zhejiang University, praised the speed of the legislative process, interpreting it as a sign of the country’s determination to ensure fair treatment for the private sector, promote high-quality growth, and demonstrate the broad support for this path.

For the first time, the private sector is explicitly recognised in law as a key component of the socialist market economy – a pillar of Chinese-style modernisation, a foundation for high-quality development, and a driving force behind building a modern socialist country and realising national rejuvenation.

This new dynamic is giving businesses renewed confidence. In Jiaxing, Zhejiang Province, the Zhejiang Jisen Metal Technology plant is operating at full capacity. “Through this law, the state officially recognises us as builders and promoters of economic development,” explained Qin Bin, the company’s vice president. “It shows how much importance the country places on private enterprises, and it strengthens our confidence.”

Addressing concerns

Ensuring fair competition has long been a top concern for private businesses, many of which have faced various forms of discrimination. The new law makes this a clear priority. According to Qi Yudong, dean of the Business School of Beijing Normal University, many of the challenges facing private enterprises stem from local policies, whether industrial or investment-related. The law therefore mandates the creation of a fair competition review mechanism, the removal of regulatory entry barriers, and a ban on all forms of discrimination in public tenders and procurement.

The legislation also introduces a unified national “negative list” system for market access: any sector not included on this list is open to all businesses, including private ones, on an equal footing. This provision has sparked keen interest in the agricultural sector. Wan Junhua, president of Cantonese Popular Group, hopes it will dismantle the invisible barriers that have long constrained his industry.

Financing remains another major challenge, particularly for small and medium-sized enterprises (SMEs). Although the situation has improved in recent years, access to credit is still difficult for many private businesses, observed Zeng Gang, director of the Shanghai Institute for Finance and Development.

For Chen Lu, vice president of public affairs at UU Paotui, a company based in Henan Province, the financial support enshrined in the law is crucial. “The incorporation of guarantee mechanisms into the law provides real stability for us. It will allow us to strengthen R&D and explore new markets.”

The law introduces innovative tools for financing and guarantees. Article 21 allows private enterprises to use accounts receivable, warehouse receipts, shares, or intellectual property as collateral, which is a significant relief for the sector.

On the innovation front, one of the law’s most impactful provisions is the opening up of major national scientific projects and strategic research infrastructure to private enterprises. Tian Yaosi, vice president of Beijing-based space company LandSpace, noted that access to state scientific equipment had previously been difficult, time-consuming and costly. Now, with guaranteed access under the law, a major barrier to innovation has been lifted.

To improve the overall business climate, the law also sets up a coherent governance framework regulating market supervision, investment, financing, innovation, and public services. It explicitly prohibits repeated inspections, arbitrary penalties, and excessive administrative fees, which entrepreneurs have long complained about.

Focus on implementation

Following the law’s enactment, the attention has now shifted to its effective implementation. On 19-20 May, the National Development and Reform Commission (NDRC) launched a nationwide series of initiatives, including a public awareness campaign and direct exchanges with private sector representatives, to ensure the law is publicised and enforced across the country.

At a State Council Information Office press conference on 8 May, several support measures were listed: a revised negative list for market access, new regulations on payment deadlines for SMEs, rules for implementing fair competition reviews, and updated guidelines for improving the social credit system and reducing business-related fees. Many local governments have already begun adapting these policies to their specific contexts.

According to Zheng Bei, deputy director of the NDRC, this year will see the launch of high-quality projects worth approximately 3 trillion yuan ($418 billion) in key sectors such as transport, energy, water management, new infrastructure and urban development, all with strong private sector participation. Enterprises will also be encouraged to invest in future industries, contribute to national technological innovation initiatives, and take part in the development and testing of new products and technologies.