New Law to Safeguard Private Economy

China's top legislative body recently passed the country's first law to promote the development of the private economy. The law, which comprises nine chapters and 78 articles, will take effect on May 20.

This landmark legislation for the first time codifies into law the principles of consolidating and developing the public sector while encouraging, supporting and guiding the non-public sector and promoting private businesses development and the growth of private entrepreneurs. It establishes the legal status of the private economy and explicitly states that promoting the private economy's sustained, healthy and high-quality development is a long-term national policy.

Professor Sun Wenkai, deputy director of the National Institute of Small and Medium-Sized Enterprises at Renmin University of China (RUC) and a professor at RUC's School of Economics, presented revealing statistics: The private sector contributes over 50 percent of tax revenue, more than 60 percent of GDP, over 70 percent of technological innovations, above 80 percent of urban employment. It also accounts for more than 90 percent of all enterprises.

While facing new opportunities, China's private economy encounters multiple challenges. "Although the negative list for market access continues shrinking, invisible barriers persist. Private enterprises still face institutional obstacles in securing government procurement contracts or state-owned enterprise orders," Sun said. Besides, financing difficulties still exist, especially for small and medium-sized enterprises.

Previously, China had issued policy documents and administrative regulations related to the private economy. "However, compared to laws, policy documents demonstrate relatively limited institutional effects and insufficient stability," explained Xu Wenming, deputy director of the School of Law and Economics at China University of Political Science and Law. The new law will provide stronger legal safeguards and help create a stable, fair, transparent and predictable development environment for private businesses.

In innovation-driven sectors like AI, new energy and drones, many private enterprises have emerged as trailblazers. Their market sensitivity and lower trial-and-error costs make them potent incubators of disruptive technologies. But challenges persist, including funding shortages, talent gaps and limited access to research infrastructure, Sun pointed out.

Xu said the law establishes a comprehensive policy support system spanning basic research to achievements transformation and resources allocation to rights protection. "This complete innovation ecosystem will enhance private enterprises' innovative capabilities and market competitiveness," he said.

The legislation also guides private entities to align with national strategic needs and global science and technology frontiers, focusing on fundamental and cutting-edge research, as well as developing core technologies, generic foundational technologies and interdisciplinary frontier technologies. "This will steer private capital toward strategic sectors like semiconductors, AI and quantum technology," Xu added.

Source: Science and Technology Daily