Opinion: Grasping the Essence of the Private Economy Promotion Law

The recent release of the draft Private Economy Promotion Law in China by the Ministry of Justice and the National Development and Reform Commission has garnered significant attention. This foundational legislation specifically targets the growth of the private economy, seeking to improve the developmental environment, ensure fair market competition, and promote healthy advancement for private entrepreneurs. Its introduction has sparked over 1,000 comments and suggestions within a week of its publication on October 10, showing the high level of anticipation surrounding its enactment [para. 1].

The Politburo meeting on September 26 emphasized the draft's role in assisting enterprises to overcome challenges by fostering a favorable environment for the non-public sector. With nine chapters and 77 articles, the draft addresses core areas such as property rights protection and fair competition, which are crucial for the sustainable development of the private economy. These measures offer institutional safeguards designed to maintain a stable and healthy growth trajectory for private entities [para. 2].

The private economy is a driving factor for modernizing China and is integral to achieving high-quality development. Since the reform and opening-up policy, its contribution has expanded significantly. Private enterprises' share of the total number of national enterprises rose from 79.4% to 92.3% between 2012 and 2023. The number of Chinese private companies in the Fortune Global 500 list increased from six to 36 in this period. This points to the sector's growing strength and innate flexibility [para. 3].

The draft law translates successful policies from the reform era into formal legal structures, enhancing clarity and authority, aiming to establish stable expectations. Clear legal expectations allow entrepreneurs to plan future developments confidently, reinforcing the rule of law as a pillar of assurance for investments and business growth [para. 4].

A key emphasis is on property rights protection. Article 56 asserts the legal sanctity of personal, property, and other rights of private economic entities and their operators, prohibiting infringements by any party. It also addresses property requisition, seizure, and associated procedures, thus responding to significant concerns from the private sector about security and predictability in property rights [para. 5].

Fair competition is underscored as being vital to a functional market economy, as articulated in Article 3. The draft enshrines principles of equal treatment and joint development, providing a solid legal foundation for private entities' participation in fair competition. It ensures these organizations are on an equal footing with other economic entities, thereby facilitating their contribution to China's economy [para. 6].

Market access fairness is foundational to the draft law’s objective. It stipulates that all economic organizations may enter sectors outside the restrictive negative list on an equal legal basis. Furthermore, it requires government policies to undergo fair competition reviews, ensuring they promote, rather than hinder, a unified market for fair competition [para. 7].

Future measures must consistently apply these legal protections for private enterprises throughout law enforcement and judicial contexts. Efforts should aim at dismantling implicit barriers present in processes like government procurement and bidding. The importance of small and midsize enterprises is highlighted, given their critical role in fostering innovation and job creation. Future guidance through complementary legal tools is essential for safeguarding private enterprises' rights and interests [para. 8].

This law's alignment with the desires of the private sector reflects the commitment of legislative bodies and stakeholders to a comprehensive consultative process. By integrating diverse feedback, this law aims to stabilize expectations and reinforce entrepreneurs’ confidence [para. 9].