Commentary: China’s New Law for Private Business Needs Judicial Teeth

The Private Economy Promotion Law, officially enacted on May 20, 2024, is a landmark regulation aimed at safeguarding the interests of private entrepreneurs in China. Despite its clear legal provisions, enforcement is expected to face challenges due to a lack of historical implementation experience, ambiguity in enforcement standards, and the prevalence of administrative cases rooted in complex government-business relations. Given these complexities, the introduction of judicial interpretations is vital to clarify standards and protect legitimate business conduct. This need is underscored by the sensitivity inherent in administrative discretion and the emerging nature of the legal framework governing private enterprises[para. 1].

All legal texts, including the new law, undergo a transition from theoretical articulation to practical case law, with regional discrepancies in enforcement intensity. The Private Economy Promotion Law, in particular, deals directly with the sensitive area of government-business interaction. A central challenge is defining and protecting “legitimate rights and interests” without enabling punitive overreach for minor business infractions, while equally ensuring action against genuine violations. The balance between regulatory rigor and leniency is crucial to maintaining a favorable business climate for private firms[para. 2][para. 3].

An illustrative example can be found in tax enforcement: some regions have retroactively revoked exemptions and treated previously compliant acts as illegal. Such actions breed uncertainty, erode trust, and complicate decision-making for enterprises. Policy unpredictability in enforcement undermines confidence among private entrepreneurs[para. 4].

Since early 2024, and marked notably by the July 2024 Third Plenum of the 20th Central Committee, China’s leadership has shown greater policy support for private enterprises. The meeting called for legal reforms, enhanced protection of property rights, and improved rights for entrepreneurs. The subsequent introduction and public consultation on the promotion law signified these commitments in practice[para. 5].

Top-level meetings, including the December Central Economic Work Conference and a February 2024 symposium led by Xi Jinping, have reiterated China’s resolve to ensure equal market access, financing opportunities, and participation in key projects for private firms. The leadership’s messaging continues to stress the broad potential for private sector growth[para. 6].

This heightened attention aligns with the “three challenges” articulated at the Third Plenum—managing macroeconomic complexity, technological and industrial change, and rising societal expectations. These reflect both continuity from reform-era policy and a recognition of new economic realities[para. 7].

Private entrepreneurs prioritize certainty regarding personal freedom and asset security, over and above regulatory concerns. The Supreme Court has cautioned against disproportionate punishments and regulatory abuses, reaffirming the need for proportional enforcement to foster business confidence and sustainable economic engagement[para. 8][para. 9]. Positive signals since mid-2024 appear to have lifted entrepreneur sentiment compared to earlier in the year, though concern and hesitance persist[para. 12].

Key confidence obstacles remain, including future economic prospects, policy direction, and uneven recovery in investment and consumption. Ongoing policy refinement, including the new law, plays a role in stabilization but requires further consolidation[para. 13][para. 14].

The law also addresses the relationship between state-owned enterprises (SOEs) and private firms, emphasizing equal market entry, resource access, and financing—moving towards a “what is not prohibited is allowed” principle[para. 15][para. 16]. This could end long-standing exclusion of private players from lucrative government projects.

Regional economic imbalances and local government fiscal strains persistently challenge law enforcement, as financially pressured authorities may unfairly target private firms. The central government plays a crucial role in monitoring enforcement and establishing precedents for punishing abuses, promoting consistent and fair law application[para. 18][para. 19][para. 20]. Ultimately, ongoing optimization of the enforcement environment is needed for the law’s objectives to be realized and for entrepreneurial confidence and enterprise growth to be fully restored[para. 21].