Yang Rong used to be a legendary figure in China. In the early 1990s, the stoutly built self-made entrepreneur managed to turn around a state-owned loss-making minivan maker in Liaoning ( 遼寧 ) into one of China’s biggest auto companies.

Listed on the New York Stock Exchange in 1992, Brilliance China Automotive Holdings was then billed as the first state-backed Chinese company to list in New York – a sign of China’s opening up – at a time when tapping capital markets was very much at a nascent stage on the mainland.

Along the way, Yang had reportedly amassed a personal fortune of about US$840 million, making him the country’s third richest man, according to Forbes. But his luck turned in 2002. Like most of the so-called joint stock companies involving state assets during that period, the ownership structure of the parent company, which controlled Brilliance China was opaque and nebulous because of a lack of laws governing property rights, among other things.

After Yang fell out with Bo Xilai ( 薄熙來 ), then governor of Liaoning, his assets were seized by the provincial government and he was forced to flee to the United States after the province filed criminal charges against him. Yang then sued Bo and the provincial government to no avail.

Yang’s case, while high-profile, is not isolated but one of a countless number in which entrepreneurs have been forced to give up their assets in disputes over ownership, or thrown in jail on trumped up charges of stealing state assets or other economic irregularities.

China may have amended the constitution in 2004 to protect “legitimate private property rights” and promulgated the Property Rights Law in 2007, but – as Chinese officials have readily admitted – authorities have frequently violated property rights and the protection of intellectual property rights is weak, to say the least.

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Last Sunday, more than a few eyebrows were raised among economists and entrepreneurs when mainland authorities released comprehensive guidelines to shore up protection of property rights in an effort to “raise people’s sense of wealth security, boost social confidence, foster positive expectations and raise the impetus for entrepreneurship and innovation by various economic entities”.

Xinhua said the guidelines were the first by the central government aimed at providing equal, comprehensive and law based protection to all kinds of property rights.

The timing is certainly interesting as the guidelines were approved by a leading group on deepening reforms headed by President Xi Jinping (習近平) in August, but were released after a three-month delay.

The guidelines come amid an economic slowdown in which the private sector, which contributes more than 60 per cent of China’s GDP growth and provides over 80 per cent of jobs, is undergoing one of its most lethargic phases. The economic headwinds, coupled with Xi’s tough anti-corruption campaign, which targets corrupt officials but often implicates entrepreneurs who are accused of bribing those officials, have heightened insecurity and anxiety among private businessmen, leading to a slump in investment sentiment and an outflow of capital.

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While it is too early to say how the guidelines will go down with the jittery private sector, the announcement won initial praise from reform-minded observers including Wu Jinglian (吳敬璉), one of China’s most respected economists.

In a lengthy article published in People’s Daily, Wu hailed the guidelines as a landmark document and said thorough implementation would determine the success of China’s economic transformation.

Indeed, the guidelines seek to directly address some of the long-standing issues haunting private businessmen. For instance, the document for the first time has tried to tackle the so-called “original sins”, which underpinned the rise of most of China’s private businesses in the initial years of reform and opening up. During this period private businessmen were forced to engage in illicit activities, such as issuing bribes to obtain bank loans or breaching regulations later considered outdated and rescinded.

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Even though many of those enterprises have since grown big and totally legitimate, those “original sins” have hung over the heads of entrepreneurs like the Sword of Damocles. There have been many cases in which local authorities brought up old scores to go after certain businesses, damping investment sentiment.

The document calls for light punishment or no punishment over such historical issues, particularly those related to outdated laws and regulations. If thoroughly implemented, the guidelines should go some way to ease the concerns of many businessmen.

In addition, the document stresses that law enforcement officials should take a prudential attitude towards freezing and auctioning property that belongs to private businesses suspected of unlawful behaviour.

In a press conference on Tuesday, a Supreme People’s Court official said concrete measures would be taken to address currently prevalent practices in which enterprises under investigation had their assets and bank accounts frozen – often making them impossible to operate – even in cases where the severity of the allegations need not warrant such action.

More intriguingly, the document emphasises that efforts must be made to right misjudged or unjust court decisions involving disputes over large amounts of property and compensation should be granted to wronged parties. In particular, it says judicial authorities should screen and correct cases in which there were doubts and that had produced “social implications”.

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The court official said it had already drafted rules for how to work on those historical cases. But, as Wu pointed out, addressing those cases will require political courage and wisdom. Indeed, whether and how the authorities address cases like Yang’s, which involve hundreds of millions of US dollars, will be quite the litmus test.

Wang Xiangwei is the former editor-in-chief of the South China Morning Post. He is now based in Beijing as editorial adviser to the paper