Urgent to Revive Economy, China to Enact Private Economy Promotion Law

Facing concerns over an economic downturn, the Chinese government is creating the 'Private Economy Promotion Law.' Amid warning signs for economic recovery due to stock market collapse and real estate market contraction, this move is interpreted as an effort to empower investors and the private sector.

China Central Television (CCTV) reported on the 21st that "the Ministry of Justice and related agencies have begun the legislative process for the Private Economy Promotion Law." The Ministry of Justice explained that the bill aims to "address corporate concerns and effectively implement equal treatment between state-owned enterprises and private enterprises through legal means." However, CCTV did not disclose specific provisions or legislative procedures.

[Image source=AFP Yonhap News]

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CCTV stated that the law will focus on "protecting the property rights of private enterprises and the rights and interests of entrepreneurs, ensuring fair market participation and access, and guaranteeing fair treatment within the judicial system," adding that "concerns of private enterprises, such as managing overdue payments for small and medium-sized enterprises, will also be addressed." The announcement attracted more attention as it came just days before the Standing Committee of the National People's Congress, China's highest legislative body, convenes.

However, based on precedent, the prevailing view is that significant improvement in the market environment is unlikely. The Hong Kong South China Morning Post (SCMP), citing experts, pointed out that "the related bill will not greatly improve China's business environment and is unlikely to introduce particularly innovative measures."

Corporate law specialist Tan Tai dismissed the bill as "old wine in a new bottle." He added, "The law alone can only have minimal effect in stabilizing the economic downturn," emphasizing that "stopping the decline depends on those responsible for enacting and enforcing the law."

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Max Jenglein, Chief Economist at the German think tank Mercator Institute for China Studies, said, "The proposed law shows a kind of desperation," and predicted, "It is a continuation of measures announced since mid-last year and may not include new elements."

Previously, in July last year, China maintained a market-friendly stance by announcing 31 guidelines for the development of private enterprises. Subsequently, it made concrete efforts such as relaxing real estate-related regulations to stimulate the economy and lowering interest rates linked to mortgage loans.

On the 21st, the State Council also announced recent "Guiding Opinions on Additional Regulation and Supervision of the Imposition and Enforcement of Fines," stating that it will strictly investigate and punish issues such as unjustified increases in fines and illegal dispositions. In October last year, the Standing Committee reviewed and passed the "Decision on the Cancellation and Adjustment of a Number of Fine Items." As a result, 33 administrative regulations and departmental rules that imposed fines on enterprises were abolished or adjusted. In August 2022, 53 fine items related to enterprises in sectors such as transportation and markets were abolished or adjusted.

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