China Unveils New Law to Boost Private Sector Amid Slowing Economy And US Tariff Impact

As the US-China trade war escalates, Beijing is bolstering its private sector to navigate economic headwinds. According to Bloomberg News, China’s newly enacted law aims to provide private enterprises with equal footing alongside state-owned firms, even as factory activity contracts and exports to the US plummet under the weight of steep tariffs.

According to Xinhua News Agency, on April 30, during the Standing Committee of the National People’s Congress Session, Chinese lawmakers passed a private sector promotion measure. The legislation will take effect on May 20. The legislation codifies the government's policies, ensuring private firms receive equal treatment in market access, financing, and innovative support, akin to their state-owned counterparts. It also prohibits excessive fines and administrative penalties against private companies.

This move is seen as a strategic pivot by President Xi Jinping’s administration to reassure entrepreneurs and stabilize the economy amid external pressure. However, critics have raised concerns over the new law’s lack of clear enforcement mechanisms, casting doubt on how effectively it will protect companies on the ground.

According to Bloomberg News, the Chinese manufacturing sector is showing signs of strain. The world’s second-biggest economy’s factory activity slipped into its worst contraction since December 2023. The National Bureau of Statistics on April 30 said that the official Purchasing Managers’ Index (PMI) for April dropped to 49 from 50.5 in March, indicating a contraction in factory output. Similarly, the non-manufacturing PMI, which tracks services and construction, also fell to 50.4 from 50.8, signaling a broader slowdown.

The trade dispute between Washington and Beijing is showing no sign of letting up. China has retaliated with its own tariffs, and diplomatic relations with the two countries remain tense. Chinese Foreign Minister Wang Yi has critized the US approach, warning that any appeasement would only embolden what he described as “the bully”.

Amid these escalating tensions, American companies like Boeing have become ensnared in the trade conflict. Chinese airlines have halted orders and deliveries, and some jets have been rerouted back to the US, underscoring the broader impact of the ongoing tariff war on global businesses.

President Donald Trump’s decision to impose 145 per cent tariffs on Chinese goods has significantly added pressure on Chinese exporters. The tariff hike, aimed at curbing China’s trade surplus with the US, has worsened the economic strain, and in retaliation, China has slapped its own tariffs on American goods. As a result, cargo shipments between the two countries have plunged by as much as 60 per cent, affecting supply chains and amplifying the economic fallout.

While China has introduced measures to support its struggling firms and stimulate domestic consumption, it has refrained from launching large-scale economic stimulus. Instead, officials are focusing on executing previously approved economic packages while urging companies to align with government policies to weather the economic storm.