A week after the passage of a law on China’s private economy, officials said the bill would “unleash” the potential of the non-state sector.

China will use a recently passed law supporting its private economy as a springboard for growth, officials said, with the non-state sector becoming all the more crucial as the country looks inward for economic momentum amid an unprecedented trade war with the US.

“There is an urgent need to improve relevant institutional measures in response to prominent problems encountered [by the private enterprises] in practice,” said Wang Zhenjiang, China’s vice-minister of justice, at a press conference for the new law on 8 May.

Wang added that private enterprises still faced difficulties in areas such as fair market competition, equal market access, financial support and legal protections.

The law had clearly defined the legal status of the private economy and the government’s support for it for the first time, Wang said, adding the legislation is “expected to further unleash the internal momentum and creative vitality of the private sector.”

Officials from the Legislative Affairs Commission of the National People’s Congress Standing Committee — China’s highest legislative body — attended the briefing with representatives from the National Development and Reform Commission, the country’s top economic planner.

Also present were figures from the National Financial Regulatory Administration and the All-China Federation of Industry and Commerce.

The news conference came a week after the passage of the country’s much-anticipated Private Economy Promotion Law which, among its clauses, regulates administrative powers to protect the non-state sector.

The 78-article law is set to take effect on 20 May 20.

The world’s second-largest economy is turning to its private sector to help meet its annual target of “around 5%” of gross domestic product growth, as exports are pared back amid a fierce tariff war with the US and other external headwinds.

While the enactment of the law was hailed by state media as evidence Beijing is following through on oft-repeated pledges to revitalise the private economy, entrepreneurs and analysts are watching its implementation closely to see whether it will have real bite – particularly if it will empower firms to take local governments to court and curb fines viewed by many businesspeople as arbitrary and profit-driven.

The private sector contributed to half of China’s total tax revenue, 60% of gross domestic product and 80% of urban employment in 2023, according to the National Bureau of Statistics.

But a prolonged slump in the property sector, sluggish consumer spending and lingering regulatory uncertainty have weighed on investor confidence for years.

In February, at a high-profile symposium with some of the country’s most prominent entrepreneurs — the first of its kind since 2018 — President Xi Jinping reaffirmed the essential role of the private sector in the country’s economy.

Republished from South China Morning Post, 8 May 2025