Against the backdrop of the ongoing trade war between China and the United States, the “Private Economy Promotion Law” that was not passed during the “Two Sessions” in March was finally approved during a meeting of the National People’s Congress Standing Committee on April 30 and will be implemented starting from May 20. With many Chinese foreign trade enterprises facing widespread shutdowns, a shift towards domestic sales, and damage to private enterprises, can this new law, which is claimed to support private businesses, provide timely relief?
The “Private Economy Promotion Law” released by the Chinese Communist Party state media for the first time enshrines the slogan “Two Unswervings” into law. The so-called “Two Unswervings” slogan was first put forward by the CCP in 2002, which emphasizes the unwavering support for strengthening and developing the state-owned economy while encouraging, supporting, and guiding the development of the non-public sector.
Over the past two decades, despite private enterprises supporting the overall economy, state-owned enterprises with low efficiency have maintained economic dominance, with the CCP still maintaining tight control over private businesses.
The newly passed “Private Economy Promotion Law” in its second article emphasizes the promotion of private economic development “under the leadership of the Chinese Communist Party” and to “ensure the correct political orientation of private economic development.” Article 34 further states that the political leadership role of the CCP organs should be exerted in promoting the work of private economy.
David Huang, an American economist, commented to Epoch Times that while the CCP appears to legislatively safeguard private enterprises, in reality, it is strengthening the party’s control over the private economy. Emphasis on “Party leadership” and “correct political orientation” shows that the policy objective is not market freedom, but a political orientation, continuing the united front logic against private enterprises.
Huang Jinqiu, a small business owner in mainland China, expressed to Epoch Times that the official emphasis on the so-called “two unswervings” between public and private economies is inherently contradictory. During the era of Mao Zedong, the CCP pursued a planned economy leading to hardships for the people, and it was only after realizing the need to sustain its own power that economic reforms were initiated, giving rise to private businesses labeled as “socialist market economy,” which itself is a contradiction.
Huang Jinqiu pointed out that at present, the CCP is facing a critical juncture in its history, with the outbreak of a trade war with the United States, and democratic countries worldwide growing wary of communism, even attempting to contain the CCP, causing China’s economy to spiral into crisis.
The “Private Economy Promotion Law,” which failed to pass during the March Two Sessions, has now been officially released upon the eruption of the US-China trade war, garnering attention.
The US-China trade war remains at a standoff. Currently, the United States has imposed a 145% tariff on most Chinese goods, while China retaliated with a 125% retaliatory tariff on US goods.
Publicly available reports indicate a widespread shutdown of Chinese foreign trade enterprises, exacerbating the shift towards domestic sales.
Maritime intelligence platform Linerlytica informed its clients this week that China’s shipment volume is extremely weak, with a reduction of up to 50%.
Data released by China’s National Bureau of Statistics on April 30 showed that the official Purchasing Managers’ Index (PMI) for the manufacturing sector in April recorded 49, indicating a contraction in manufacturing, below the Reuters-surveyed median prediction of 49.8.
Private enterprises account for over 90% of the total number of enterprises in China. By the end of 2024, the number of private enterprises had exceeded 55 million households, contributing over 50% of tax revenue, over 60% of GDP, more than 70% of technological innovations, and over 80% of urban employment.
Regarding foreign trade, official Chinese data shows that in 2024, the total national exports reached $3.58 trillion, with private enterprises accounting for $2.32 trillion, or 64.6%.
Baibai, an enterprise owner in Changzhou, Jiangsu Province (alias), told Epoch Times reporters that nearly 90% of local companies have shut down. He stated, “Our area is full of businesses, factories, barely surviving. Many things were ruined by that boy (Xi Jinping), who doesn’t understand anything and acts blindly.”
David Huang noted that the “Private Economy Promotion Law” shows clear intentions of “policy rescue” aimed at stabilizing private enterprises amid the backdrop of the trade war and economic downturn. However, market confidence relies on institutional safeguards and predictability, rather than mere political posturing through legislation.
Baibai believes that with a significant reduction in foreign trade orders, the economy may worsen in the second half of the year. The introduction of the “Private Economy Promotion Law” is apparently aimed at boosting corporate confidence. Nevertheless, its benefits are limited, as the law includes many communist-oriented provisions, ensuring political direction, which conflicts with a market economy and hinders its operation, akin to putting a chain and shackle on a dancing entity.
Baibai further revealed issues regarding GDP falsification, stating, “In the past, when local government officials came to our plant for statistics, they asked, ‘How much growth did you achieve?’ I replied, ‘What? In these times, there is still growth? We have regressed by 50%.’ They said, ‘You can’t write it like that, just say there is a 5% growth.’ I said, ‘I would be legally responsible for this,’ and they said, ‘It’s okay.'”
The Chinese media outlet “The Paper” published a commentary yesterday criticizing the US tariffs, stating that Chinese private enterprises, with a focus on exports to the US, are inevitably affected. The authorities should now motivate, support, and guide the development of the private economy.
David Huang remarked that “The Paper” blaming the US is a typical case of “shifting external blame,” while in reality, the Chinese institutional environment is the primary source of risks for private enterprises.
The “Private Economy Promotion Law” includes a section on “fair competition,” stipulating that in areas beyond the negative list for market access, various economic entities, including private economy organizations, can “legally enter equally.” It also addresses issues of “legally equal entry” for private economic concerns in government fund arrangements, land supply, emission standards, public data opening, and qualification licensing.
Huang pointed out that achieving so-called fair competition is unlikely. While the legislation mentions “equal entry under the law,” in practical terms, local protectionism, uneven resource allocation, and the advantage of red capital still exist. “Institutional inequality” remains the core issue.
The “Private Economy Promotion Law” also includes provisions prohibiting the imposition of fines without legal basis and the abuse of power for economic gain, such as enforcing laws in remote areas, evidently targeting the controversial issue of cross-region law enforcement by public security officials in recent years.
Huang noted that prohibiting arbitrary fines and remote enforcement in writing is inadequate in solving actual problems. In reality, China’s problem lies not in the absence of laws but that “rule of law has not arrived.” The root of the abuse of power in cross-region enforcement lies in the lack of transparent supervision, independent judiciary, and cannot be eradicated by mere legislation.
Regarding the purpose of this legal provision, Huang Jinqiu acknowledged that it indeed aims to address the issue of private enterprises facing “cross-region law enforcement.” However, he highlighted that there are reasons why the public security and judicial authorities need to carry out cross-region investigations. For instance, in the past, the CCP passed a “Property Rights Law,” but for many years, many local party committees and governments used their power, judicial organs to illegally seize the land of the people, depriving them of their property – do people have property rights protection? No.
Baibai also opined that legislative efforts by the CCP cannot solve the underlying issues. He mentioned a very successful entrepreneur in their locality who tragically committed suicide by jumping off a building. Despite his company being profitable and well-known globally in the oil parts industry, local authorities accused him of offering a bribe of $2 million to officials, leading to his demise. During the funeral, the government deployed many plainclothes personnel.
David Huang concluded that the best way for private entrepreneurs in China to protect themselves is by reducing reliance on government subsidies and exports, enhancing overseas asset deployment, maintaining financial transparency and compliance, while remaining highly alert to political risks.