New law to streamline, bolster private sector

China's newly introduced Private Sector Promotion Law is poised to help private enterprises overcome persistent challenges, facilitate multinational cooperation and promote the development of global industrial supply chains, experts said.

The law took effect on May 20. It encompasses nine key areas including key problems such as fair competition, investment and financing incentives, sci-tech innovation and intellectual property rights protections.

The legislation aims to optimize the development environment for the private sector, ensure equitable market participation for all economic entities, and foster the healthy growth of both private businesses and private entrepreneurs.

"The law will help private entities become more confident and drive their growth. It will definitely have a significant impact on the private sector and strengthen economic foundations for Chinese modernization," said Huang Hanquan, head of the Chinese Academy of Macroeconomic Research, at an event on Tuesday organized by the Center for China and Globalization, a Beijing-based think tank.

"It focuses on breaking down institutional barriers. For the private sector, the new legislation marks many firsts," said Huang, adding that it's the first time the legal status of the private sector has clearly been defined and also the first time promoting sustainable and high-quality development of the private sector is stated as a major long-term strategy of the country.

When it comes to fair competition, Huang said that the law improves market assessment systems and fair competition enforcement, ensuring private entities can compete fairly in the marketplace.

"The enterprises expect that the law will protect their rights, and also promote the standardization of operations, spur innovation and also strengthen government services," said Wei Chu, dean of the School of Applied Economics at Renmin University of China.

After conducting a routine survey of private enterprises, Wei said that there are several barriers in the infrastructure and public utilities sectors, and issues regarding fair competition and market access. The law regulates the participation of the government and actively responds to related concerns.

"The law facilitates the establishment of a market-oriented risk-sharing mechanism for private sector financing, enabling banking institutions and credit guarantee providers to expand cooperation with private enterprises," said Wang Peng, a researcher at the Beijing Academy of Social Sciences.

This mechanism diversifies risk through market-based approaches and mitigates financial institutions' concerns about lending to private enterprises, thus facilitating greater capital flow into the private sector, Wang said.

The more dynamic private enterprises become, the stronger their innovation capability will be, generating greater willingness to collaborate with foreign-funded enterprises, Huang said.

The law provides institutional support for private enterprises to overcome technological barriers and integrate into global value chains by strengthening overseas IP protection, Wang said.

The law also encourages private enterprises to take the lead in undertaking major national technological research projects, he said, adding that this innovative mechanism injects new impetus into the development of global industrial chains by reducing research and development costs and accelerating the commercialization of technological achievements.