Xu Hong: Create a Healthy Development Environment for the Private Economy Using Rule of Law Thinking
General Secretary Xi Jinping attaches great importance to the development of the private economy, emphasizing that "the private economy is an inherent element of our country's economic system; private enterprises and private entrepreneurs are our own people," and "we must effectively protect the legitimate rights and interests of private enterprises and private entrepreneurs according to the law." Promoting the continuous, healthy, and high-quality development of the private economy is not a temporary expedient, but a long-term strategy and a major guiding principle and policy that the state persists in over the long term. Since May 20 of this year, the Law of the People's Republic of China on the Promotion of the Private Economy has been in effect, marking a milestone in the history of the development of the private economy in China. This law explicitly defines the legal status of the private economy for the first time, stipulating that "the private economy is an important component of the socialist market economy, a fresh force in advancing Chinese-path modernization, an important foundation for high-quality development, and an important force in promoting the full building of a modern socialist power and the realization of the great rejuvenation of the Chinese nation." Deeply studying and implementing the spirit of General Secretary Xi Jinping’s important speeches requires the sound implementation of this law to guarantee the continuous, healthy, and high-quality development of the private economy through the rule of law.
China's private economy has developed amidst the continuous enrichment and perfection of the system of socialist rule of law with Chinese characteristics.
In February of this year, while attending a symposium on private enterprises, General Secretary Xi Jinping pointed out: "Currently, our country's private economy has reached a considerable scale and carries significant weight." Since the beginning of reform and opening up, and especially since the New Era, China's private economy has grown from small to large and from weak to strong. Its overall strength, innovative capacity, and market competitiveness have greatly improved, making it an indispensable and important force in promoting China's economic development. Currently, private enterprises account for more than 92% of the total number of enterprises, contributing over 50% of the total import and export volume and tax revenue, and over 80% of urban employment.
The achievements of China’s private economy were attained under the guidance of the guiding principles and policies of the Party and the state. Especially since entering the New Era, the Third Plenary Session of the 18th CPC Central Committee proposed that "both the public sector and the non-public sector are important components of the socialist market economy and are important foundations for China's economic and social development." The 19th CPC National Congress incorporated the "Two Unwaveringlys" [1] into the basic strategy for upholding and developing socialism with Chinese characteristics in the New Era. The 20th CPC National Congress reaffirmed the "Two Unwaveringlys," and the Third Plenary Session of the 20th CPC Central Committee deployed a series of reform measures centered on "upholding the guiding principles and policies of dedicating ourselves to creating a favorable environment and providing more opportunities for the development of the non-public sector."
The developmental achievements of China's private economy are also inseparable from the continuous enrichment and perfection of the system of socialist rule of law with Chinese characteristics. For example, the Constitutional amendment passed by the Second Session of the 9th National People's Congress (NPC) inscribed the "persistence in the basic economic system where public ownership remains dominant and diverse forms of ownership develop together." The Constitutional amendment passed by the Second Session of the 10th NPC, building upon the basic economic system, added that "the state encourages, supports, and guides the development of the non-public sector." The Law of the People's Republic of China on the Promotion of the Private Economy enshrines the "Two Unwaveringlys" into law, stipulating that "promoting the continuous, healthy, and high-quality development of the private economy is a major guiding principle and policy that the state persists in over the long term." This links up with the Constitutional provisions regarding the basic socialist economic system, providing a solid legal guarantee for the development of the private economy.
General Secretary Xi Jinping has pointed out: "A socialist market economy is an economy based on the rule of law" and "the rule of law is the best business environment." As an inherent requirement of the socialist market economy and an important guarantee for its sound operation, the rule of law can protect the various legitimate rights and interests of market entities equally according to the law. By strictly enforcing the rule of law to create a stable and predictable market environment, owners of various types of property rights and market entities can feel secure and at ease while investing and starting businesses. For instance, in 2019, the Second Session of the 13th NPC passed the Foreign Investment Law, strengthening equal protection for domestic and foreign enterprises. In 2020, the Third Session of the 13th NPC passed the Civil Code, clarifying that "the state practices a socialist market economy and protects the equal legal status and development rights of all market entities." The rule of law can vigorously standardize administrative law enforcement, advance judicial justice, and create a unified, open, competitive, and orderly market system. In practice, only when the government ensures that "it does nothing that is not authorized by law" and "it must do everything mandated by law," and when judicial organs at all levels fully exercise their functions to efficiently handle various commercial disputes according to the law, can powerful judicial services and guarantees be provided to create a stable, fair, transparent, and predictable business environment. The rule of law can effectively enhance the awareness of integrity and compliance among various market entities, ensuring that business activities proceed smoothly in accordance with laws and regulations. For example, in 2014, the State Council issued the "Outline of the Planning for the Construction of a Social Credit System (2014–2020)," deploying efforts to create an excellent credit environment and enhance national competitiveness; it also promulgated the "Interim Regulations on Enterprise Information Disclosure," providing solutions to promote enterprise integrity and self-discipline and safeguard transaction security by standardizing information disclosure and strengthening enterprise credit constraints. It is exactly for these reasons that we must use the rule of law to define the boundaries between the roles of the government and the market, and adjust the interest relations of various entities within the framework of the rule of law.
At the same time, it must be noted that the development of the private economy currently still faces some difficulties and challenges. These include external objective factors such as problems triggered by changes in the stage of economic development and the transformation of industrial structures, as well as problems within private enterprises themselves, such as weak legal awareness and a lack of compliance mechanisms. It should be recognized that these difficulties and challenges have generally emerged during the process of reform and development; they are partial rather than total, temporary rather than long-term, and can be overcome rather than being unsolvable. Solving these problems requires not only that private enterprises themselves strengthen compliance construction, improve corporate governance structures, and enhance the level of decision-making and management in production and operations, but also that we continuously strengthen the construction of the rule of law. We must accelerate the promotion of a legal system based on the Law on the Promotion of the Private Economy and supported by relevant laws, regulations, and rules. We must use a rule-of-law mindset to create an environment conducive to the continuous, healthy, and high-quality development of the private economy, boost the formation of favorable market expectations with the stability of the rule of law, and use rule-of-law methods to handle irregular behaviors in the development of the private economy.
The criminal justice environment is an important component of a rule-of-law business environment and serves as the "ballast stone" [2] for enhancing the sense of security within the private economy. Using a rule-of-law mindset to create an environment for the healthy development of the private economy involves, from the height of upholding and perfecting the system of socialism with Chinese characteristics and promoting the modernization of the national governance system and governance capacity, optimizing the criminal justice environment and perfecting criminal justice systems and policies related to the private economy, thereby supporting private enterprises to "travel light" and advance steadily. Nullum crimen, nulla poena sine lege (no crime or punishment without a law) is a basic principle of modern criminal law and the cornerstone of modern criminal rule-of-law civilization, serving as both a value criterion and a technical path. In the process of perfecting the criminal justice systems, structures, and mechanisms related to the private economy, we must persist in the principle of legality and effectively protect the legitimate rights and interests of private enterprises and private entrepreneurs according to the law.
Upholding the principle that an act is not a crime unless expressly stipulated by law.
General Secretary Xi Jinping pointed out: "Effectively protect the legitimate rights and interests of private enterprises and private entrepreneurs according to the law. This sentence contains two keywords: first, 'legitimate rights and interests,' emphasizing that what is protected is legitimate rights and interests, not illegal interests; second, 'protect according to the law,' meaning that protection must comply with laws and regulations, and we cannot engage in 'extralegal favors.'" We must both effectively protect the legitimate rights and interests of private enterprises and entrepreneurs and timely discover and investigate the illegal acts of private enterprises.
The principle that an act is not a crime unless expressly stipulated by law is an internationally recognized criminal justice standard. Article 3 of the Criminal Law of the People's Republic of China stipulates: "Any act that is expressly stipulated by law to be a crime shall be convicted and punished in accordance with the law; any act that is not expressly stipulated by law to be a crime shall not be convicted and punished." Article 63 of the Law of the People's Republic of China on the Promotion of the Private Economy stipulates: "If production and business activities do not violate the provisions of the Criminal Law, they shall not be treated as crimes." In implementing this principle within criminal justice activities involving the private economy, the following two points should be prioritized.
First, strictly distinguish the boundaries between economic disputes and economic crimes, administrative violations and criminal offenses, and civil liability and criminal liability. Upholding the principle of legality require technical precision, clarity, and standardization in the standards for conviction and sentencing. In particular, the constitutive elements and sentencing scales for crimes such as contract fraud, embezzlement, misappropriation of funds, and illegal business operations should be further clarified through judicial interpretations to unify case-handling standards. To this end, we must accurately grasp the boundary between civil disputes and criminal crimes, and correctly distinguish between the legitimate financing of private enterprises and illegal fundraising, or between contract disputes and contract fraud. For business acts that fall outside the negative list for market access and are not explicitly prohibited by law or judicial interpretation, criminal responsibility for the crime of "illegal business operations" [3] must not be pursued. We must resolutely prevent and correct local and departmental protectionism, prevent and correct profit-driven law enforcement and justice, and prevent and correct the use of criminal means to intervene in economic disputes.
At present, we must continue to deeply and solidly carry out special actions to standardize law enforcement involving enterprises, strengthen special supervision over irregular cross-regional law enforcement and profit-driven law enforcement, and effectively and equally protect the legitimate rights and interests of all types of enterprises and entrepreneurs while strictly handling their illegal acts according to the law.
Second, pay attention to the boundary between corporate (unit) crimes and individual crimes. Adhere to the statutory principle of corporate crime: an act can only be treated as a corporate crime if the law stipulates it as such. If management personnel of a private enterprise commit a crime but the law does not explicitly stipulate that criminal responsibility should be pursued against the "unit" (the enterprise), the private enterprise cannot be held criminally liable for a corporate crime. We must strictly distinguish between natural persons committing crimes using the name of the unit and actual corporate crimes. Criminal responsibility can only be pursued against a private enterprise when the crime is committed in its name, as stipulated by the Criminal Law, and the proceeds of the crime belong to the enterprise.
Upholding the principle of applying the old law while favoring the lighter penalty.
General Secretary Xi Jinping pointed out at the 2018 symposium on private enterprises: "Regarding some irregular behaviors of some private enterprises in the past, we must look at the problem with an eye toward development and handle them according to the principles of legality and the benefit of the doubt, so that entrepreneurs can shed their ideological burdens and move forward light." It should be seen that in the historic transition from a highly centralized planned economy system to a vibrant socialist market economy system, China's socialist legal system, capital market system, and private economy have all undergone a process of continuous maturation and development.
The principle of "applying the old law while favoring the lighter penalty" (从旧兼从轻) is the basic principle of China's criminal law regarding the retroactive effect of laws. It mainly means that when the law at the time of the act is inconsistent with the law at the time of the trial, the "old law" (the law at the time of the act) should in principle be applied; however, if the law at the time of the trial is more favorable to the defendant, then the "lighter" law (the law at the time of the trial) should be applied according to the principle of favorability. Applying the "old law" is to maintain the stability of the legal order and the predictability for the public, which is also an inherent requirement for strengthening expectation management in a socialist market economy. Applying the "lighter penalty" is to respect the developmental and open nature of the law and to better protect the freedom and human rights of citizens.
Upholding this principle means viewing and handling the irregular issues that may have existed in the operation and development of private enterprises from an objective, historical, and developmental perspective. Following the principle of non-retroactivity, we should declare innocence in cases where evidence for conviction is insufficient.
Specifically, if the law at the time did not consider the act a crime, or if the law at the time did consider it a crime but the limitation period for prosecution has expired, or if the current law no longer considers it a crime even if the limitation period has not expired, criminal prosecution procedures should not be initiated. For cases where both the old and current laws consider the act a crime and it remains within the limitation period, we should comprehensively consider the degree of market development and the level of corporate governance at the time, the nature, circumstances, and consequences of the crime, the performance of repentance, and the current operational status of the enterprise. We must prudently implement the policy of "balancing leniency and severity" according to the law. If the act only violated legal provisions or hindered economic order without actually harming the legitimate rights and interests of the state, citizens, legal persons, or other organizations, a policy of appropriate leniency can be adopted.
At present, we must improve mechanisms for effectively preventing, identifying, and correcting wrong cases involving enterprises. By increasing the intensity of higher-level courts' review and direct trial of cases, and improving the system for instructing cross-regional courts to conduct retrials, we should correct criminal cases involving enterprises where there was an error or injustice according to the law.
In February of this year, General Secretary Xi Jinping emphasized at the symposium on private enterprises: "We must strengthen supervision over law enforcement, and centralize efforts to rectify arbitrary charges, fines, inspections, and seizures, to effectively protect the legitimate rights and interests of private enterprises and entrepreneurs according to the law. At the same time, we must recognize that China is a socialist country under the rule of law, and illegal acts by enterprises of any ownership type cannot evade investigation and punishment." This reflects the persistence in strictly enforcing the rule of law and the principle of comprehensively governing the country according to the law.
Upholding the necessity, appropriateness, reasonableness, and justice of criminal penalties.
During the 15th collective study session of the Political Bureau of the 18th CPC Central Committee, General Secretary Xi Jinping pointed out:
“Establish fair, open, and transparent market rules, hand over to the market those economic activities that can be effectively regulated by market mechanisms, entrust to the market the matters that the government should not manage, and allow the market to play a full role in all areas where it can function. This will promote resource allocation to achieve maximum benefit and optimized efficiency, providing enterprises and individuals with greater vitality and broader space to develop the economy and create wealth.”
Judicial administration is a key link in guaranteeing and realizing the legalization of fair competition; impartial justice is the last line of defense in maintaining social fairness and justice. Only by clarifying relevant judicial rules can we effectively demonstrate the value orientation of safeguarding market fairness through the rule of law. Adhering to the principle of "crimes and punishments stipulated by law" [4] not only reflects the formal rule of law—meaning that no act is a crime unless expressly provided by law and that laws are not retroactive—but also embodies the substantive rule of law values regarding the necessity and rationality of criminal law intervention. This ensures that punishments are necessary, appropriate, reasonable, and fair, achieving the organic unity of political, social, and legal effects [5].
The criminal prosecution of private enterprises concerns not only the private entrepreneurs themselves but also enterprise employees and upstream and downstream associated firms; it even touches upon the sustainable development of the entire industry. To ensure that criminal punishment remains necessary, appropriate, reasonable, and fair, we must strengthen the assessment of the consistency between criminal policies involving the private economy and macro-policy orientations. We must comprehensively, accurately, and reasonably evaluate and determine social harm from various perspectives—including economic development, market order, and public order and good customs [6]. We should comprehensively consider factors external to the operating entities, such as policy cycles and market risks, and properly grasp the boundaries between criminal intervention and administrative regulation, market adjustment, and enterprise self-discipline, while respecting the principles and laws of the market economy.
Currently, China is accelerating the construction of a scientific and technological power and realizing high-level scientific and technological self-reliance and self-strengthening. Enterprises are the primary subjects of scientific and technological innovation. China's private enterprises contribute more than 70% of technological innovation achievements, encompassing over 80% of national-level "Little Giant" enterprises characterized by specialization, refinement, uniqueness, and innovation [7], and more than 92% of national high-tech enterprises. General Secretary Xi Jinping has pointed out: “Innovation has always been a 'nine deaths, one life' [8] undertaking.” Original innovation, in particular, has long cycles, high difficulty, and great uncertainty. To provide a rule-of-law guarantee for enterprise technological innovation, criminal justice must respect the laws of scientific and technological innovation. For behaviors in the production, operation, and financing activities of the private economy that possess significance for technological and industrial innovation, we must construct a judicial mindset and mechanism for "error tolerance." We must uphold the principle of modesty and restraint (谦抑原则) [9] regarding cautious and prudent incrimination. We must not only set "traffic lights" [10] for capital but also allow for a sufficient "window observation period." The path of entrepreneurship should not be turned into a minefield or a thicket of thorns; rather, we must use the civilization of the rule of law to create an entrepreneurial ecosystem that encourages ventures and tolerates failure, thereby maximizing the promotion of the entrepreneurial spirit and stimulating the vitality of entrepreneurship and innovation throughout society.
(Author’s affiliation: School of Criminal Law, East China University of Political Science and Law) Source: People's Daily September 11, 2025, Page 9 Web Editor: Huihui