Opinion | Unusual draft law signals China’s resolve to protect private economy

China’s newly published draft private-economy promotion law should be welcomed by investors, as it shows that Beijing is genuinely concerned about its private sector and is determined to stop local authorities from their dirty tricks against private businesses.

Some people may argue that in a mature market economy where property rights are enshrined in the law, an additional law designed to protect the private economy would be redundant. But in China’s environment, it has become not only necessary, but also urgent, to have a national law to discipline local governments when their actions hurt the private economy.

It is a known fact that the Chinese government has a complicated relationship with the private sector.

On the one hand, Beijing has recognised the private sector as a key part of the national economy, contributing the bulk of the country’s economic output, tax income and jobs. The government has repeatedly promised fair treatment for private businesses.

On the other hand, under orthodox Marxism, the private sector continues to be regarded as ideologically inferior to public ownership, a view that has restricted private businesses’ access to policy support, bank credit, land and other resources.

Amid China’s economic downturn, many local governments are struggling financially as land sales revenues dried up. That has led to worrying reports of cash-strapped governments going above and beyond to extract money from private businesses.