China touts new law as foundation for private sector growth
China will use a recently passed law supporting its private economy as a springboard for growth, officials said, with the non-state sector becoming all the more crucial as the country looks inward for economic momentum amid an unprecedented trade war with the United States.
'There is an urgent need to improve relevant institutional measures in response to prominent problems encountered [by the private enterprises] in practice,' said Wang Zhenjiang, China's vice-minister of justice, at a press conference for the new law on Thursday.
Wang added that private enterprises still face difficulties in areas such as fair market competition, equal market access, financial support and legal protections.
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The law has clearly defined the legal status of the private economy and the government's support for it for the first time, Wang said, adding the legislation is 'expected to further unleash the internal momentum and creative vitality of the private sector.'
Officials from the Legislative Affairs Commission of the National People's Congress Standing Committee – China's highest legislative body – attended the briefing with representatives from the National Development and Reform Commission (NDRC), the country's top economic planner.
Also present were figures from the National Financial Regulatory Administration (NFRA) and the All-China Federation of Industry and Commerce.
The news conference came a week after the passage of the country's much-anticipated Private Economy Promotion Law, which among its clauses regulates administrative powers to protect the non-state sector.
The 78-article law is set to enter into force on May 20. More detail does not necessarily mean better ... things evolve quickly, and overly specific rules can sometimes hinder development
The world's second-largest economy is turning to its private sector to help meet its annual target of 'around 5 per cent' for gross domestic product growth, as exports are pared back amid a fierce tariff war with the US and other external headwinds.
'We will work to fully implement the law and strengthen its mandatory enforcement,' said Zheng Bei, deputy head of the NDRC.
The government would assist private firms, Zheng added, in areas such as market access, delayed payments, rights protection, hardship aid and improving communication between state entities and businesses.
She also pledged to expand private sector participation in major national projects, saying the NDRC will launch initiatives worth around 3 trillion yuan (US$415.31 billion) this year in transport, energy, water conservancy and other infrastructure.
While the enactment of the law was hailed by state media as evidence Beijing is following through on oft-repeated pledges to revitalise the private economy, entrepreneurs and analysts are watching its implementation closely to see whether it will have real bite – particularly if it will empower firms to take local governments to court and curb fines viewed by many businesspeople as arbitrary and profit-driven.
Wang of the Ministry of Justice said several provisions in the law are highly targeted, citing those regulating administrative law enforcement as one example. While concise, he said, they are of 'significant' value.
'As a fundamental law, more detail does not necessarily mean better. In reality, things evolve quickly, and overly specific rules can sometimes hinder development,' he said.
'The law focuses on addressing major issues that require immediate legislative action by clarifying key institutional measures ... while also leaving room for future development over the next decade.'
He added that his ministry will implement the law by tightening oversight of, quickly setting up a complementary legal framework and establishing a channel for logging complaints and reports of misconduct in administrative enforcement.
Cong Lin, deputy head of the NFRA, said the agency would guide financial institutions to step up support for private enterprises by encouraging banks to show greater tolerance for non-performing loans from small and micro-sized firms, and by introducing a liability exemption mechanism for frontline credit officers to ease their reluctance to lend.
Regarding the tech sector – where private enterprises have stood out in recent years – Cong said the NFRA has been working to improve its model for finance, piloting equity investment to support tech-driven, innovative firms.
The private sector contributed to half of China's total tax revenue, 60 per cent of gross domestic product and 80 per cent of urban employment in 2023, according to the National Bureau of Statistics.
But a prolonged slump in the property sector, sluggish consumer spending and lingering regulatory uncertainty have weighed on investor confidence for years.
In February, at a high-profile symposium with some of the country's most prominent entrepreneurs – the first of its kind since 2018 – President Xi Jinping reaffirmed the essential role of the private sector in the country's economy.
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