JC Master Research | Safeguarding the Development of the Private Economy: An Interpretation of the Law on Promoting the Private Economy

On April 30, the 15th Meeting of the Standing Committee of the 14th National People’s Congress adopted the Law of the People’s Republic of China on Promoting the Private Economy, which will take effect on May 20, 2025. This is the first foundational law in China specifically dedicated to the private sector. It not only addresses the longstanding core concerns of the private economy through a “commitment to rule of law,” but also elevates the CPC Central Committee’s major policies and key initiatives for fostering the development of the private sector into legal norms, thereby consolidating the achievements of private-sector growth over more than four decades of reform and opening-up.
 

I. Legislative Background and Significance
 

Previously, regulations pertaining to the private sector were scattered across laws and policy documents such as the Civil Code and the Law on the Promotion of Small and Medium‑Sized Enterprises, lacking systematic legislative coverage. By contrast, the newly enacted Law on the Promotion of the Private Sector comprises nine chapters and 78 articles, totaling over 9,600 characters, and sets out detailed requirements across key areas—including fair competition, investment and financing support, technological innovation, standardized operations, service provision, protection of rights and interests, and legal liability. For the first time, the law enshrines the principle of “two unwavering commitments” — consolidating and developing the public sector while encouraging, supporting, and guiding the development of the non‑public sector — and explicitly afoffices the goal of promoting both the sound development of the private sector and the healthy growth of private‑sector entrepreneurs. It also establishes the private sector’s status as a distinct legal entity, thereby providing a unified and stable rule‑of‑law framework for its continued development.
 

In response to the challenges facing the private sector—such as barriers to fair competition, difficulties in accessing financing, and inadequate protection of rights and interests—the law strengthens safeguards through institutional design. For example, it explicitly prohibits restricting or excluding private-sector entities in public‑resource procurement processes and standardizes cross‑jurisdictional enforcement practices, thereby addressing longstanding issues like “difficult market access” and “arbitrary enforcement.”
 

The Law on Promoting the Private Economy translates the CPC Central Committee’s requirements for treating the private sector on an equal footing and affording it equal protection into concrete legal provisions, thereby converting the Party’s policies and guidelines for fostering the private sector’s sustained, sound, and high‑quality development into a formal legal framework. This will better enable the rule of law to serve as a robust safeguard that consolidates fundamentals, stabilizes expectations, and delivers long-term benefits.
 

II. Core Institutional Innovations and Key Legal Points
 

(1) Equal Competition and Market Access
 

The Law on Promoting the Private Sector stipulates that, in sectors not listed on the negative list for market access, all types of economic entities—including those in the private sector—may enter on an equal footing in accordance with the law. It also mandates regular assessments and the timely review, revision, or repeal of policies and measures that impede the establishment of a unified national market and fair competition, while requiring people’s governments at all levels and their relevant departments to implement the system of fair‑competition reviews.
 

The Law on the Promotion of the Private Economy mandates that antitrust and anti-unfair competition enforcement agencies, in accordance with their respective duties and powers, prevent and prohibit monopolistic and unfair competitive practices in market‑based economic activities, and, in accordance with the law, address abuses of administrative power that exclude or restrict competition, thereby fostering a favorable market environment for private-sector entities.
 

(II) Technological Innovation and Intellectual Property Protection
 

The Law on Promoting the Private Sector explicitly supports private-sector entities in participating in national science and technology projects, encourages capable private-sector organizations to take the lead in undertaking major national technological research tasks, opens up major national scientific research infrastructure to private-sector entities, facilitates technology exchange and the transfer and commercialization of research outcomes, and promotes deep integration among industry, academia, and research.
 

The Law on the Promotion of the Private Economy calls for strengthening intellectual property protection for innovative achievements, implementing a system of punitive damages for IP infringement, and, in accordance with the law, investigating and prosecuting unlawful acts such as infringement of trademark rights, patent rights, copyright, trade secrets, and acts of counterfeiting or confusion.
 

(III) Protection of Rights and Standardized Law Enforcement
 

The Law on the Promotion of the Private Economy requires people’s governments at all levels and their relevant departments to establish smooth and effective mechanisms for communication between government and enterprises, promptly solicit opinions and suggestions from all types of economic entities, including private-sector organizations, and address the legitimate issues they raise. The law also stipulates that no entity may impose fees on private-sector organizations in violation of laws and regulations, levy fines without a legal or regulatory basis, or compel such organizations to bear financial burdens. Furthermore, administrative organs conducting law enforcement activities shall avoid, or minimize, any adverse impact on the normal production and business operations of private-sector entities, and shall respond to and handle their reasonable and lawful requests in a timely manner.
 

The Law on the Promotion of the Private Economy stipulates that the personal rights, property rights, and operational autonomy of private economic entities and their operators are protected by law, and may not be infringed upon by any organization or individual. It requires strict differentiation between economic disputes and economic crimes and adherence to statutory provisions on statutes of limitations; where production and business activities do not violate criminal law, they shall not be treated as criminal offenses. Where the facts are unclear, the evidence is insufficient, or criminal liability is not pursued in accordance with the law, cases must be dismissed, no prosecution initiated, proceedings terminated, or a verdict of not guilty rendered, as prescribed by law. The use of administrative or criminal measures to unlawfully interfere in economic disputes is prohibited.
 

(4) Government Contract Performance and Payment of Accounts Payable
 

The Law on Promoting the Private Economy stipulates that state organs, public institutions, and state-owned enterprises shall, in accordance with law or contractual provisions, make timely payments to private-sector entities. They may not refuse or delay such payments on grounds such as personnel changes, adherence to internal payment procedures, or, in the absence of contractual stipulations, waiting for approval of completion acceptance or final‑account audits. Except as otherwise provided by laws or administrative regulations, they may not compel the use of audit results as the basis for settlement. Furthermore, when large enterprises procure goods, works, or services from small and medium-sized private-sector entities, they must reasonably set payment terms and make timely payments, and may not condition their payments on receipt of funds from third parties.
 

The Law on Promoting the Private Economy mandates the establishment of a sound system for sanctioning breaches of trust and for credit restoration. Private-sector entities and their operators who rectify their untrustworthy conduct, mitigate any adverse effects, and meet the criteria for credit restoration may submit an application for such restoration.
 

III. Legislative Highlights and Implementation Prospects
 

The Law on Promoting the Private Economy consolidates fragmented policies and practical experience, elevating established practices—such as fair‑competition reviews and cross‑jurisdictional law‑enforcement cooperation—to the level of law to strengthen institutional discipline. By bolstering oversight of administrative enforcement and standardizing government conduct, the law further advances the “delegation, regulation, and service” reform, thereby reducing the institutional transaction costs faced by private enterprises.
 

During its implementation, the Law on Promoting the Private Economy must coordinate the responsibilities of multiple agencies, including those overseeing antitrust and market regulation, to prevent regulatory overlaps or gaps. Local governments are also required to refine supporting policies; for instance, Jiangsu Province is set to promulgate the Regulations of Jiangsu Province on Promoting the Private Economy.
 

IV. Conclusion
 

The Law on the Promotion of the Private Economy adopts a “promotive legislative” model, relying primarily on incentive‑based provisions while strengthening its binding force through a dedicated chapter on legal liability, thereby striking a balance between guidance and regulation. It is recommended that future judicial interpretations further clarify the procedures for private‑sector entities to protect their rights, such as the allocation of the burden of proof in litigation arising from government breaches of contract.
 

The Private Economy Promotion Law addresses the core concerns of private enterprises through a rule-of-law framework, but its effectiveness hinges on the refinement of supporting policies and the strength of their implementation. Moving forward, it will be essential to closely monitor the issuance of relevant ancillary measures and developments in judicial practice, thereby ensuring that the law transitions from paper to real‑world application.