New legislation for China’s private sector economy

The Private Economy Promotion Law of the People’s Republic of China was adopted by the Standing Committee of the National People’s Congress on 30 April 2025, and took officially effect on 20 May.

The new law grants private enterprises equal legal standing and market opportunities alongside other ownership forms, such as State-Owned Enterprises (SOEs). The legislation acts in favor of fair competition practices for private firms, in terms of access to bidding, procurement etc. For example, Art. 10 provides for a nationwide unified negative list system for market access: private firms will be able to equally compete in any sector not included in the list.

Another important point is related to R&D schemes: private enterprises are encouraged to undertake major national science and technology projects, while entitled to receive from the state greater research infrastructure and data resources. The law also mandates government bodies and SOEs to honor payment obligations on schedule, with penalties for default.

Having faced for long-time discrimination and inequality of treatment compared to SOEs, private firms may find enhanced protection through the new legislation. However, as often occurs in the country, the actual safeguards offered by the law can only be evaluated against future enforcement mechanisms.

With the entry into force of the new Chinese Company Law on December 29, 2023, an important change has been introduced to the regulation of limited liability companies regarding the registered Capital. Specifically, companies established after the enforcement of the new Company Law (July 1, 2024) must pay their share capital within 5 years from the date of establishment. In detail:

– Article 47 states that for companies formed after the new regulation’s entry into force, the registered capital must be fully paid within five years from the date of incorporation. It should be noted that this requirement significantly changes the current situation by imposing a deadline for the full payment of the registered capital, which previously was not present.

– Article 266 essentially provides that companies established before the current law’s enforcement should bring their capital contributions within the provisions and rationale of the new regulation according to specific implementations rules that will be issued by the State Council.

In other words, for the already established companies, there is no peremptory deadline for the payment of Capital, and likely, in the course of the next five years, there will be additional provisions to regulate when and if the 5-year term should be applied.

Our team of professionals is available to assist you in interpreting and assure compliance to new regulations.