The Private Sector Promotion Law: How State-Owned Enterprises Can Respond

The Private Sector Promotion Law: How State-Owned Enterprises Can Respond

1. Introduction: The new law is a beacon, illuminating the new voyage of market economy

The emergence of the Private Sector Promotion Law is nothing more than setting up a new beacon for China's market economic system reform, marking the move towards a higher level of legalization and modernization of my country's economic governance system. With its lofty status as a basic law, it provides an unprecedented solid legal foundation for the "two unwavering principles", the fundamental policy of national economic development.

This mammoth system aims to optimize the development ecology of the private economy and stimulate market vitality. It constantly assesses the situation, responds to changes, and points out the strategic direction and practical path.

2. the Private Sector Promotion Law: The legal foundation for market competition in the new era

(1) Legislative power: respond to the call of the times and reshape the market structure

The birth of the Private Sector Promotion Law profoundly reflects the background of the times when our country's economy has entered the track of high-quality development. It is not only a powerful response to the core demands of private enterprises in terms of fair competition, factor protection, and rights protection, but also a strategic determination and key step for the country to deepen the reform of the economic system and build a high-level socialist market economic system. With thunderous momentum, this law is committed to breaking down the systemic barriers that have long plagued the development of the private economy. It has far-reaching significance and affects the overall situation.

Its core value is to solemnly declare and protect the equal legal status and fair competition rights of various market entities through national legislation, lay a solid foundation for the rule of law for the construction of a unified, open, competitive, and orderly modern market system across the country, and lead China's market economy to a new realm of more maturity and standardization.

(2) Core Essence: Legal Program of Equality, Fairness, Protection and Empowerment

The legal framework of the Private Sector Promotion Law is closely built around the five pillars of "guaranteeing equal legal status, strengthening fair competition review, optimizing the business environment, empowering innovative development, and improving rights protection". Its core principles and system design have many highlights, which can be summarized as follows:

1. Rigid implementation of the principle of equality: Article 4 of the Private Sector Promotion Law eloquently declares: “The state treats all market entities equally and equally, and ensures in accordance with the law that all market entities have equal access to production factors and equal participation in market competition. , Equality is protected by law.” The repeated emphasis on keywords such as “equality,” “fairness,” and “equal” in the article demonstrates the legislator’s firm will to implement this principle throughout, making it transform from a policy declaration to a rigidly binding and actionable legal norm.

2. The institutional iron law of fair competition: Chapter 2, dedicated to “Fair Competition,” embodies the legislator’s ambition to reshape the market order. Its core is to emphasize the comprehensive implementation of the fair competition review system, resolutely oppose monopoly and unfair competition, strictly prohibit the abuse of administrative power to eliminate or restrict competition, and draw a clear competition bottom line for all market participants.

3. Sunshine allocation of production factors: The law clearly states that all types of market entities have equal rights in access to core production factors such as land, capital, technology, talents, and data, as well as public service resources. This move aims to break down invisible barriers and promote the efficient and fair flow of resources based on market rules.

4. A solid shield for the protection of rights and interests: In response to "stubborn problems" such as defaulted accounts that have been strongly reported by private enterprises, the Private Sector Promotion Law has made targeted regulations (such as Article 29), supplemented by a diversified dispute resolution mechanism, to provide unprecedented legal protection for the legitimate rights and interests of private enterprises.

3. the Private Sector Promotion Law’s multi-dimensional perspective on state-owned enterprises

(1) Market access and competition ecology: from “franchised track” to “fair playing field”

Article 12 of the Private Sector Promotion Law “The state implements a unified market access system to ensure that all types of market entities have equal access to industries and fields that are not expressly prohibited by laws and regulations.” This effectively strengthens the “no prohibition or entry” principle and directly refers to possible explicit or implicit access barriers for non-public capital. For state-owned enterprises, this means:

1. The competitive landscape is facing reshaping: The dominant position in the traditional market will face more intense market challenges, and more companies will need to rely on their own core competitiveness to participate in the competition in the future.

2. Public resource transactions will become more transparent: In areas such as bidding and government procurement, more emphasis will be placed on openness, fairness, and impartiality, and discriminatory terms will be strictly prohibited, forcing state-owned enterprises to improve transparency and standardization.

3. The concept of "competitive neutrality" is deeply implanted: The spirit of the law promotes state-owned enterprises to be more consistent with the operation model of general commercial entities in the field of commercial competition, which is conducive to improving their international competitiveness.

(2) Marketization of resource allocation: from “status advantage” to “value orientation”

Articles 19 and 20 of the Private Sector Promotion Law respectively emphasize that all market entities have equal access to land and other natural resource elements and financial support. This will bring:

1. The advantages of traditional factors are facing calibration: If the traditional advantages of state-owned enterprises in acquiring resources such as credit and land are not based on pure commercial considerations and market value, they will face strict scrutiny of market-oriented rules.

2. Enlightenment of innovation in financing models: The law encourages financial institutions to explore new types of rights pledge financing such as intellectual property rights of private enterprises, which indicates a new financing trend with asset quality and innovation capabilities as the core, and is also of reference for state-owned enterprises.

3. Strengthening of financial and business discipline constraints: State-owned enterprises need to demonstrate better financial health and business operation capabilities in order to obtain financing under equal market conditions, and their reliance on "implicit state guarantees" will gradually decrease.

(3) Compliance risk control and legal liability: from "fuzzy zone" to "clear red line"

the Private Sector Promotion Law puts forward higher-level compliance requirements and clearer legal responsibilities for the business operations of state-owned enterprises, especially in their interactions and cooperation with private enterprises:

1. Strictly prohibit arrears from becoming "high-voltage lines": Article 29 of the Private Sector Promotion Law directly addresses the pain points of survival for small, medium and micro enterprises, and puts a "tightening curse" on the supply chain management, contract performance and payment processes of state-owned enterprises.

2. Establish a "firewall" for antitrust and unfair competition: The law reiterates the prevention and suppression of monopoly and unfair competition behaviors. If state-owned enterprises are involved in such behaviors, they will face significant legal and reputational risks.

3. Higher requirements for the spirit of the contract: State-owned enterprises must pay more attention to fairness in terms and equivalence of rights and obligations when contracting with private enterprises.

(4) Business model and cooperation ecology: from "individual combat" to "symbiosis and mutual prosperity"

the Private Sector Promotion Law encourages "promoting the mutual integration and coordinated development of state-owned enterprises and private enterprises" and creates a good atmosphere for in-depth cooperation between economies of different ownership types:

1. Inject "catalyst" into mixed ownership reform: A fair competitive environment will promote the establishment of strategic partnerships between state-owned enterprises and private enterprises based on real market needs and complementary advantages, and promote the in-depth development of mixed ownership reform.

2. Seek iterative upgrades in cooperation models: State-owned enterprises need to go beyond pure capital cooperation and expand into diversified and ecological directions such as joint technological research, deep collaboration in the industrial chain, and joint development of emerging markets.

3. Share national strategies and become “fellow travelers”: The law supports private enterprises to participate in major national strategies, opening up a broad space for state-owned enterprises and private enterprises to work together in key areas.

4. Strategic planning of state-owned enterprises: embracing change and forging ahead

Facing the profound changes brought about by the Private Sector Promotion Law, state-owned enterprises must conduct a comprehensive review and reshaping with a high degree of strategic clarity and action consciousness.

(1) Recalibration of strategic direction: focus on main business and refine core competitiveness

State-owned enterprises need to decisively transform from their dependence on policy dividends and resource tilt, focus on their main responsibilities and main businesses, especially in key industries and core areas related to national security and the lifeline of the national economy, as well as public services, emergency support, forward-looking strategic emerging industries and other national strategic needs, and concentrate on building and strengthening their irreplaceable core competitiveness.

Vigorously improve technological innovation and sourcing capabilities, market-oriented lean operation capabilities and modern corporate governance capabilities.

(2) Compliance system upgrade: embedded in the heart, externalized in the behavior

It is crucial to build a dynamic compliance management system with the spirit of the Private Sector Promotion Law (especially the principle of equal protection and fair competition) as the core, covering the entire business process and involving all employees:

1. Comprehensive review of internal system processes: identify and correct elements inconsistent with the Private Sector Promotion Law principles.

2. Optimize supply chain and contract management: Establish a fair transaction mechanism to eliminate arrears and ensure fair contract terms.

3. Standardize market competition behavior: optimize the bidding process and strengthen anti-monopoly and anti-unfair competition compliance.

4. Improve the risk response mechanism: improve internal complaint handling and rapid response to external disputes, and proactively conduct risk assessment and mitigation.

5. Cultivate a deep compliance culture: Carry out regular training for all employees on laws and regulations such as the Private Sector Promotion Law to integrate compliance awareness into the blood of the company.

(3) Deepening of market-oriented reform: activating potential and releasing vitality

We will unswervingly deepen market-oriented reforms and stimulate endogenous motivation by improving the modern enterprise system with Chinese characteristics. Actively and steadily promote mixed ownership reform, absorb high-quality social capital, and optimize ownership structure and governance efficiency. Establish and improve market-oriented personnel selection and employment, assessment, incentive and restraint mechanisms.

(4) Co-construction of industrial ecology: open collaboration and joint construction of value chains

Adhering to the concepts of openness, cooperation and win-win, we proactively break the boundaries of ownership and actively build an industrial ecosystem for collaborative innovation and common growth with private enterprises:

1. Promote industrial chain value alliance: build an upstream and downstream collaborative innovation platform to achieve complementary advantages and resource sharing.

2. Expand multi-dimensional cooperation model: Carry out in-depth strategic cooperation in the fields of technology research and development, talent training, capital operation, market expansion and other fields.

3. Build strategic alliances in specific fields: Form a strategic community with complementary advantages with high-quality private enterprises.

4. Join hands to participate in national strategies: unite high-quality private enterprises to jointly participate in major national strategic projects and international cooperation.

5. Conclusion: In the tide of the times, state-owned enterprises should bravely stand at the forefront and dance with the people.

The implementation of the Private Sector Promotion Law is not only a powerful engine for the development of the private economy, but also a profound optimization and sublimation of the rule of law for the entire Chinese market economic system. State-owned enterprises should not regard it as a constraint, but as a "millstone" and external driving force to sharpen themselves and enhance their core competitiveness.

Looking to the future, only by adapting to changes and embracing the new can state-owned enterprises stand at the forefront of this profound market transformation. Not only can they achieve their own transformation and upgrading and have everlasting foundations, but they can also work hand in hand with the private economy to jointly write a magnificent chapter of high-quality development of the Chinese economy and contribute solid economic strength to the great rejuvenation of the Chinese nation.