China passes its first law on private sector assistance

By Alimat Aliyeva

China has passed its first comprehensive legal framework aimed at fostering the growth of the non-state sector, marking a major policy shift in support of private enterprise. The law is designed to provide stronger legal protection and greater policy support for private businesses, which have long played a vital—yet sometimes vulnerable—role in the country's economy, Azernews reports.

According to official statements, the government will promote private entrepreneurship through “powerful supportive measures” and “fair law enforcement” to ensure a level playing field for all market participants. The new legislation introduces mechanisms to guarantee fair competition, reduce administrative barriers, and encourage both domestic and foreign investment in private enterprises.

A key feature of the law is its explicit commitment to equal treatment of all types of business entities, including private, state-owned, and foreign-invested companies. Authorities emphasized that private businesses will now be better integrated into national development strategies and protected from arbitrary interference.

In line with China’s broader economic transformation goals, the law also encourages private companies to play a larger role in emerging strategic industries, such as green energy, high-end manufacturing, digital infrastructure, and artificial intelligence. It also aims to support the technological upgrading and modernization of traditional industries, ensuring they remain competitive in a fast-changing global market.

The legislation, which will come into effect on May 20, 2025, represents a clear signal that China is looking to revitalize confidence in its private sector amid recent economic headwinds, including slowing growth and concerns over regulatory tightening.

A Strategic Pivot This move is seen by analysts as a strategic pivot to unleash entrepreneurial innovation, boost employment, and ensure long-term economic resilience. While the state sector continues to dominate key industries, the private sector contributes to over 60% of China’s GDP and provides more than 80% of urban jobs.

The law may also help counter concerns among international investors about China’s regulatory environment, offering more predictability and transparency for doing business in the country. Its long-term success, however, will depend on consistent implementation and how effectively local governments adhere to the spirit of the law.