New law provides stability boost to China's private economy

On May 20, 2025, China’s private economy promotion law came into force, marking China’s first dedicated, foundational legislation for private-sector development. In the latest episode of the W.E. Talk, three distinguished experts—Yang Decai, a member of the 14th National Committee of the CPPCC, and Director of NJU Private Economy Institute; Rupert Hoogewerf, Hurun Report Chairman and Chief Researcher; and Denis Simon, visiting professor at the Asian Pacific Studies Institute of Duke University joined a discussion on related topics. They agree that this law fills legal and institutional gaps, ushering China’s private economy into a new era of systematization and rule of law.

Legal safeguard: Laying the foundations for fair competition

“The private economy promotion law breaks through the previous fragmentation and, for the first time, systematically constructs a legal framework to protect private enterprises,” explained Yang Decai. Although China’s constitution has already recognized the importance of the private sector, relevant legal safeguards had long been scattered across different statutes, lacking coherence and focused support. Hoogewerf concurs that the new law defending the private sector is “really a watershed in Chinese constitutional history.”

Yang further notes that Chapter 7 of the new law specifically mentions the protection of the legitimate rights and interests of private enterprises. And malicious slander and defamation of private enterprises and entrepreneurs through the internet must be strictly punished, according to the new law.

“For the private economy to thrive, and for entrepreneurs to gain confidence, we must first foster a public opinion environment that is truly supportive of the private sector,” Yang explains.

And by embedding the “negative list” approach to market entry and a formal “fair competition review” mechanism, the law guarantees that any sector not explicitly forbidden is open to private players—tackling hidden administrative and regulatory barriers, according to Yang.

Simon emphasizes that the law protects property rights, including intellectual rights, and offers clear financial rules, so that businesses “know how they can access capital for future investment and how they can handle foreign-exchange settlement,” thereby operating seamlessly at home and abroad.

“Confidence drives investment and enterprise growth; as long as there is confidence in the future, we will see more private enterprises sprouting up,” he says.

Economic engine: Firing up new growth momentum

“If we look at job creation, contribution to GDP, and innovation metrics, private enterprises have already become an indispensable part of China’s economy,” Simon notes.

Statistics suggest that private firms in China account for over 50% of tax revenue, more than 60% of GDP, roughly 70% of domestic innovation achievements, 80% of urban employment, and over 90% of all enterprises nationwide.

“Small private companies are the main vehicle for creating jobs and the fertile ground for developing and applying new technologies. To build an innovation-driven economy, it is essential to involve these vibrant, creative small firms,” he adds.

Hoogewerf’s data spotlight this dynamism. “On my latest Rich List, 80% of the individuals were not on the list ten years ago, meaning that eight out of ten of this year’s China Rich List are newcomers—mostly private entrepreneurs,” he observes, adding that this reflects not only massive wealth creation in traditional manufacturing and real estate but also the rise of private champions in renewable energy, energy storage, solar panels, and intelligent manufacturing.

Technology breakthroughs: Bridging the academia–industry divide

In today’s global competition, technological innovation is paramount. “Enterprises are, in fact, the primary agents of technological innovation. The law makes clear that private firms are China’s main drivers of independent innovation, entitled to equal access to capital, technology, human resources, and data, and able to participate in national strategic initiatives and emerging industries,” says Yang.

Supporting this view, Hoogewerf reports from his Unicorn List research: “As of April 2024, we identified more than 300 unicorns in China, and only about six are state-owned or state-controlled.”

He says that with universities’ research capabilities improving and aligning more closely with market needs, leading private enterprises are actively pushing technology transfer and patent applications, sparking a fresh wave of innovation.

“Attracting university talent, perfecting tech-transfer mechanisms, and strengthening the academia–industry–research pipeline will require both state-owned and private enterprise participation,” he adds.

Simon concludes with optimism: “In the foreseeable future, we are going to see even more small, dynamic, creative private enterprises emerge.” Hoogewerf, too, is confident that the deepening integration of universities, industry, and finance will give rise to a new generation of innovative startups. Yang emphasizes that the law will play a “significant role in promoting China’s high-quality economic development.”

In the view of the experts, the implementation of the Private Economy Promotion Law not only acknowledges private enterprises’ past contributions but also provides robust legal and institutional support for their future growth. By optimizing market access, protecting rights, and fostering innovation, this law unlocks a new chapter for China’s private economy—one where confidence, competition, and creativity can flourish in tandem.