BEIJING -- Chinese lawmakers advanced the draft private economy promotion law during a recent National People's Congress Standing Committee session, in a move aimed at dismantling barriers, unlocking the sector's full potential and creating a fairer and more dynamic business environment.

The proposed legislation, set to become China's first fundamental law dedicated to the private sector, explicitly defines the private sector as a vital pillar of China's socialist market economy. Observers see the draft as a pivotal step to stabilize expectations, with hopes that its swift passage will boost entrepreneurial confidence and encourage long-term investment.

Private enterprises have long been a key driving force behind China's economic ascendance, contributing more than 60 percent of GDP, and 80 percent of urban employment. By the end of September 2024, the country's 55 million registered private enterprises made up over 92 percent of all businesses in China.

Yet, industry insiders note that challenges remain, such as invisible market access barriers in key sectors, inadequate protection of private ownership, and issues with policy implementation and support.

The draft law seeks to tackle these issues by reinforcing fair competition, improving financing conditions, fostering technological innovation, enhancing regulatory clarity, and strengthening legal protections.

Crucially, the legislation stipulates that private enterprises, like all market participants, may operate in any industry unless explicitly restricted by a negative list. It also mandates regular reviews to eliminate market entry barriers, prohibits discriminatory bidding practices, and ensures fair competition.

"The draft provides legal assurance for private enterprises to participate fairly in market competition, further strengthening our confidence in development," said Wang Luohai, general manager of an equipment company in Anhui Province.

To address concerns over regulatory burdens, the second draft expands protections against arbitrary fees and fines imposed on private firms. It also specifies that multiple inspection items of the same inspection target should be consolidated whenever possible or included within the scope of cross-departmental joint inspections.

Recognizing the private sector's outsized role in technological innovation -- accounting for over 70 percent of China's technological breakthroughs and 92 percent of national high-tech enterprises -- the draft proposes stronger intellectual property protections and targeted support for firms driving major advancements.

While the draft law introduces a slew of critical measures, experts were quick to emphasize the significance of effective implementation.

"Many supportive policies for the private economy have been introduced, and effective implementation is critical to ensure that private firms genuinely experience the tangible benefits of these initiatives," said Huang Hanquan, head of the Chinese Academy of Macroeconomic Research.

POLICY-BUOYED GROWTH

The second draft comes on the heels of a high-level symposium on private firms held last week. The symposium underscored the significance of private firms and the private economy, signaling the country's commitment to fostering the healthy and high-quality development of the sector.

In response, central government bodies have acted swiftly. Key steps announced so far include removing market access barriers for private enterprises, tackling the difficulties and high costs of financing, and strengthening the crackdown on arbitrary fines.

These initiatives are just part of endeavors to shore up growth of the private economy rolled out in recent years.

In 2023, the State Council unveiled a 31-measure guideline on boosting the private sector. The same year, the National Development and Reform Commission, China's top economic planner, established a bureau dedicated to serving the development of the private sector. Multiple provincial-level regions, including Shanxi, Qinghai and Zhejiang, have all set up such bureaus.

Wu Xiaolong, deputy secretary-general of the innovation strategy research association in Guangdong Province, south China, described the establishment of these bureaus as "a bellwether."

"It showcases a strong nationwide commitment to supporting and promoting the growth of the private sector, which has firmed up confidence in entrepreneurs and bolstered economic growth," he added.

In localities where the private economy is well-developed, policymakers have implemented targeted policies based on local conditions. For instance, the eastern city of Hangzhou, home to e-commerce giant Alibaba and tech startups such as Unitree Robotics, has ensured over-15-percent annual growth rate of municipal fiscal investment in science and technology and tailored policies to match different development phases of tech startups.

Building on the solid foundation established over years of development, the private economy possesses great growth potential, said Huang Hanquan.

"China has made major strides in comprehensive strength, technological capability and economic prowess. It also boasts a continuously improving talent pool and the vast market demand created by its large population. These factors combined have created golden opportunities for the growth of private enterprises," Huang added.