Private Sector Law: A New Era for Business

In the spring of 2025, a major regulatory act, the Private Sector Encouragement Act, came into force in China, marking a transition from informal business support to institutionalization.
For start-ups, small and medium-sized businesses, this document brings both new opportunities and changed the framework of the game. In this article, we take a detailed look at what the law gives and requires – especially from the perspective of a foreign partner or importer who works (or plans to work) with Chinese manufacturing.

Where the tool comes from: the prerequisites of the law

The importance of the private sector

• Private enterprises in China are more 60% of GDP order 80% of urban employment.
• At the end of March 2025, more private companies were registered. 57 millionThey were over the top. 92% of all enterprises in the country.

Thus, the state clearly realized that further development of the economy is impossible without a stable environment for private business.

Why now?

• External pressures: trade constraints, supply chain transformation, need for technological autonomy.
• Internal challenges: slowing growth, the need to move from quantitative expansion to qualitative development.
  Therefore, the law is intended to provide a more stable, predictable legal and institutional basis for business.

What the law includes: key provisions

The law consists of 78 articles in 9 chapters. Below is an overview of the main directions:

The principle of equality and competition

The law states for the first time: “Indivisible support for the public sector and the non-public sector; sustainable development of the private economy is the most important long-term public policy.”
This means that private firms are legally guaranteed equal access to markets, resources and project participation.

Investment and financing

• The law is aimed at expanding financing channels for private enterprises: issuing shares, bonds, access to capital markets.
• A mechanism of guarantees for financing small and micro-businesses is being introduced: interaction between financial institutions and guarantee organizations.
• Creation of a system of information exchange on credit ratings of private businesses to reduce risk and increase the availability of loans.

Supporting innovation and technological development

The law encourages the participation of the private economy in key strategic areas: digital economy, green transformation, new production chains.

Services, protection of rights and guarantees

• Support services for entrepreneurs: simplification of market access, reduction of administrative barriers, accelerated access to public procurement.
• Protection of property rights and intellectual property of private firms, clear registration of their status.

Responsibility and enforcement mechanism

The law provides for legal liability for violations and establishes the role of the authorities in monitoring and supporting the implementation of the provisions. 

What this means for startups and small businesses

We are now looking at how startups, manufacturers and those working with Chinese factories and partners can benefit and pay attention.

Pros and opportunities

• Fairer access to the market. Less exclusive barriers, more chances to participate in tenders and procurement.
• Greater access to finance. If you are a partner in a Chinese factory, then financing, guarantees and lending are becoming more available, and this reduces the risk of the supplier.
• Supporting innovation. If your project is related to technology, green development, digital solutions, the Chinese side may be more open and interested.
• Improved protection of rights. Private businesses receive more explicit legal guarantees, which reduces contract uncertainty.
• More predictable context for external partners. This means that when dealing with China, you have a legal framework to refer to, not just regional practices.

What to consider / risks

• The law creates a framework, but execution It depends on the provinces and local authorities: it is necessary to check how it is implemented in practice.
• Higher expectations: With support comes demands for corporate governance, transparency, compliance – especially for access to benefits.
• Competition increases: support gives a boost to many private firms, which means that others can occupy your niche.
• Concessions and programs can be conditional, for example, through participation in government projects or priority in “national strategies”.

Practical advice for business and partners

When selecting a factory/supplier

• Check whether the factory is a private enterprise and see if it is involved in any “supported” industries (innovation, green logistics, etc.).
• Find out if the supplier uses any concessional financing or guarantee programs – this can increase its sustainability.
• Make sure to be transparent: ask about business management, risks, credit history.

When planning a startup or joint venture

• If your project is related to China, focus on areas prioritized for “private sector + innovation + green development” – there may be a better chance of support.
• Prepare yourself to meet the conditions: reporting, corporate governance, compliance.
• Use the legal provisions as an argument: “our partner is in an area supported by Chinese law.” This strengthens your position in negotiations.

Logistics, production, export

• When importing from China, choose factories that have already passed the stage of adaptation to the new law (for example, have sustainable financing, operate at the technological level).
• Assess the risks: the new environment is a game changer, so it is important not only to work with the factory, but also to consider its financial sustainability and legal environment.
• Keep an eye out for additional measures: 53 specific support measures have already been launched in 2025, according to sources. 

A new era - but not an easy path

The law to encourage the private sector is a major step forward. He creates. more predictable legal environmentIt strengthens the role of private business and opens up new opportunities for start-ups, small and medium-sized businesses. “Law + Reality” is not the same thing. Success depends on how much supplier It will be able to take advantage of opportunities: how adaptable it is, how well its processes meet new requirements.

If you’re working with China or you’re looking at it as a market/manufacturing/supplier, it’s time to prepare: study the terms, choose partners with a sense of the new rules, build long-term, sustainable relationships.

What's Next: Attention Points

• Monitor how the law is implemented at the provincial level: whether there are practices, how benefits are distributed, how external controls take place.
• Keep an eye on industry trends – especially in innovation and the green economy, where opportunities will grow.
• Consider the impact on supply chains: changing conditions in China can affect timing, prices, partnerships.