China passes private sector law, addressing gripes of beleaguered businesses

China passed a much-anticipated law to shore up the country’s private economy on Wednesday, as Beijing delivers on its oft-repeated promise to protect and promote the non-state sector at a time when the Chinese economy looks to domestic dynamism to ensure growth amid a trade war with the United States.

The 78-article Private Economy Promotion Law was passed following its third reading by the Standing Committee of the National People’s Congress (NPC), China’s top legislature. It will enter into force on May 20.

As China’s first law focused on promoting the private sector, it stipulates measures to promote fair market competition, encourage the involvement of private firms in scientific and technological projects, and safeguard their economic rights and interests, according to state media reports. The full text of the legislation has yet to be published.

The passage of the law is significant, as it creates institutional backing for the creation of a “stable, fair, transparent and predictable environment for the private sector”, according to an unnamed official from the NPC’s Legislative Affairs Commission as quoted by state news agency Xinhua.

Also of note, the official said, is the law's assurance it “does not have retroactive effect”. Analysts said this clause is likely intended to allay concerns among entrepreneurs that the law could be used to punish them for actions committed prior to the law’s passage.

Li Zhaoqian, president of the China Society for the Study of the Private-Sector Economy, wrote in an article for the Communist Party newspaper People’s Daily on Wednesday that the law’s success would depend on it being thoroughly implemented.