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On 30 April 2025, the 15th meeting of the Standing Committee of the 14th National People's Congress voted to adopt the Private Sector Promotion Law of the People's Republic of China, which came into force on 20 May. The promulgation of this law is a milestone in the development of China's private economy, and provides a solid guarantee of the rule of law for the sustainable, healthy and high-quality development of the private economy.

The implementation of the Law on the Promotion of the Private Economy has elevated the Party Central Committee's major guidelines, policies and initiatives on the promotion of the private economy into legal norms, which not only consolidates the achievements of the development of the private economy over the past 40 years of reform and opening up, but also fully reflects the Party's continuity and advancement of the theories and practices on the development of the private economy.

The Constitution of China stipulates that the State encourages, supports and guides the development of non-publicly owned economy, and supervises and manages the non-publicly owned economy in accordance with the law. The introduction of the Law on the Promotion of the Private Economy is the first time that ‘unswervingly consolidating and developing the public economy, unswervingly encouraging, supporting and guiding the development of the non-public economy,’ and ‘promoting the healthy development of the private economy and the healthy growth of people in the private economy’ have been written into the law; For the first time, the legal status of the private economy ‘is an important part of the socialist market economy, a vital force in advancing Chinese-style modernisation, an important foundation for high-quality development, and an important force in promoting the comprehensive building of our country into a socialist modernising power and realising the great rejuvenation of the Chinese nation’ has been made clear; and for the first time, it has been explicitly stipulated that the promotion of the private For the first time, it explicitly stipulates that promoting the sustained, healthy and high-quality development of the private economy is a major policy that the State has long adhered to. The Law is consistent with the constitutional provisions on the basic socialist economic system, integrates the legal system for supporting and safeguarding the development of the private economy into the socialist legal system with Chinese characteristics, and strengthens the foundation for the development of the private economy from the level of the rule of law, with far-reaching significance of the rule of law.

Under the current situation of economic development, the private economy is facing some outstanding problems in the process of healthy development. The Law on the Promotion of Private Economy focuses on these problems and further improves relevant institutional measures, which is conducive to creating a stable, fair, transparent and predictable environment for the development of private economy. Through legislation, targeted solutions to the private economy's difficulties in fair competition, investment and financing, scientific and technological innovation, standardised operation, service guarantee and protection of rights and interests can further stimulate the endogenous momentum of the development of private economic organisations. This will encourage and guide the majority of operators of private economic organisations to resolutely be builders of socialism with Chinese characteristics and promoters of Chinese-style modernisation, and to give full play to the important role of the private economy in the construction of a strong nation and the national rejuvenation of the nation. The Law is not only a fundamental law for promoting the development of the private economy, but also an important law for constructing a high-level socialist market economic system, with far-reaching implications for promoting the high-quality development of China's economy.

The promulgation and implementation of the Law on the Promotion of Private Economy is timely and necessary. Its implementation provides all-round rule of law safeguards for the development of private economy, and will definitely promote the private economy to shoulder a greater mission, assume a heavier responsibility and play a greater role in the new journey of the new era, and inject a strong impetus for China's economic and social development.

In order to better understand and apply the Private Economy Promotion Law, the author's team intends to interpret the law article by article and put forward a simple operational guide on relevant practical issues.

Chapter I General Provisions

Article 1 [Original text

Article 1 This Law is enacted in accordance with the Constitution for the purpose of optimising the environment for the development of the private economy, ensuring that all types of economic organisations participate in market competition on a fair basis, promoting the healthy development of the private economy and the healthy growth of the members of the private economy, building a high-level socialist market economic system, and giving full play to the important role played by the private economy in the national economy and social development.

[Article Interpretation

This article sets out the direct purpose of the legislation (to optimise the environment, fair competition, and promote the ‘two health’), the fundamental purpose (to build a high-level socialist market economic system, and to give full play to the important role of the private economy), and the basis for the legislation (the Constitution).

[Practical Guide

This Article is the ‘master key’ for understanding the legislative spirit of all subsequent articles, providing a fundamental guideline for private enterprises to claim their rights and interests and for the government to formulate policies.

Article 2 [Original text

Article 2 The promotion of the development of the private economy adheres to the leadership of the Communist Party of China, adheres to the people-centred approach, adheres to the socialist system with Chinese characteristics, and ensures the correct political direction of the development of the private economy.

The state adheres to and improves the basic socialist economic system with public ownership as the mainstay and the common development of multiple ownership economies, with distribution according to labour as the mainstay and multiple modes of distribution co-existing, and with the socialist market economic system; unswervingly consolidates and develops the public-owned economy, and unswervingly encourages, supports, and guides the development of non-publicly owned economy; and gives full play to the market's determinative role in resource allocation, and gives better play to the role of the government.

[Article Interpretation

This article specifies the fundamental political principles (Party leadership, people-centred, socialist system with Chinese characteristics, correct political direction) and the basis of the economic system (basic economic system, the ‘two unswerving’, the market determines the allocation of resources and better play the role of the government) for promoting the development of the private economy.

[Practical Guide

Private enterprises should understand and adapt to China's political and economic system, adhere to law-abiding operation, and integrate enterprise development into the overall situation of national development.

Article 3 [Original text

Article 3 The private economy is an important part of the socialist market economy, a vital force in advancing Chinese-style modernisation, an important foundation for high-quality development, and an important force in promoting China's comprehensive building of a socialist modernising power and realising the great rejuvenation of the Chinese nation. Promoting the sustained, healthy and high-quality development of the private economy is a major policy that the State has long adhered to.

The State insists on encouraging, supporting and guiding the development of the private economy in accordance with the law, and on giving better play to the safeguarding role of the rule of law in consolidating the fundamentals, stabilising expectations and facilitating the long term.

The State adheres to the principles of equal treatment, fair competition, equal protection and common development, and promotes the development and growth of the private economy. Private economic organisations enjoy equal legal status, market opportunities and development rights with other types of economic organisations.

[Article Interpretation

This Article highly evaluates the status and role of the private economy, clarifies the basic policy of the State in treating the private economy (encouragement, support and guidance in accordance with the law), the role of the rule of law in safeguarding the private economy (fixing the fundamentals, stabilising expectations and benefiting the long-term) and the basic principles (equal treatment, fair competition, equal protection and common development), and stresses the equal legal status, market opportunities and rights to development of private economic organisations with those of other economic organisations.

[Practical Guide

This Article is an important legal basis for private enterprises to claim equal treatment and fair competition opportunities, and is of great significance in stabilising the expectations of entrepreneurs.

Article 4 [Original text

Article 4 The State Council and local people's governments at or above the county level shall incorporate the work of promoting the development of the private economy into national economic and social development planning, establish a coordination mechanism for promoting the development of the private economy, formulate and improve policies and measures, and coordinate the resolution of major issues in the development of the private economy.

The development and reform department of the State Council is responsible for coordinating the work of promoting the development of the private economy. Other relevant departments of the State Council are responsible for promoting the development of private economy within their respective scope of responsibilities.

The relevant departments of the local people's governments at or above the county level shall carry out the work of promoting the development of the private economy in accordance with the laws and regulations and the division of responsibilities determined by the people's governments at their respective levels.

Interpretation

This article specifies the main body responsible for promoting the development of the private economy (the State Council and local people's governments above the county level), the leadership and coordination mechanism (incorporating planning, establishing coordination mechanisms, and solving major problems), and the specific division of responsibilities at the central and local levels, with the State Council's Development and Reform Department as the coordinating department.

[Practical Guide

When private enterprises encounter major difficulties, they may reflect them to the corresponding government and its development and reform departments for coordinated solutions. This article is an important criterion for measuring the fulfilment of duties by governments at all levels.

Article 5 [Original text

Article 5 Private economic organisations and their operators shall uphold the leadership of the Communist Party of China, adhere to the socialist system with Chinese characteristics, and actively participate in the construction of a strong modern socialist country.

The state shall strengthen the construction of the team of operators of private economic organisations, enhance ideological and political leadership, and give full play to their important role in economic and social development; cultivate and carry forward the spirit of entrepreneurship, and guide the operators of private economic organisations to put into practice the core values of socialism, be patriotic and dedicated to their work, abide by the law, start up businesses and innovate, and return to the society, and resolutely be the builders of socialism with Chinese characteristics and the facilitators of Chinese-style modernisation.

[Interpretation of Provisions

This Article specifies the political responsibility (upholding the leadership of the Party, adhering to the socialist system, and joining in the construction of a strong nation) and social responsibility that should be assumed by private economic organisations and their operators, as well as the State's responsibility in guiding and cultivating entrepreneurial teams, in particular cultivating and promoting entrepreneurial spirit (patriotism and dedication to the country, law-abiding operation, entrepreneurship and innovation, and repayment to the society).

[Practical Guide

Private enterprises should take law-abiding operation as the red line, and integrate ‘patriotism and dedication, entrepreneurship and innovation, and social return’ into their corporate culture, and pay attention to their political and social responsibilities.

(To be continued)

Special Announcement:

This article was originally written by JIA LAWYER, and only represents the author's own views, and shall not be regarded as a formal legal opinion or advice issued by JIA LAWYER. If you need to reproduce or quote any content of this article, please indicate the source.