China’s draft private sector promotion law, if passed, will offer stronger legal protection for small and medium-sized enterprises in technology and innovation amid escalating geopolitical tensions, while opening fresh opportunities for Hong Kong-mainland integration, Hong Kong and Guangdong representatives at the two sessions said.

The draft law incorporates the central government’s commitments to both public and nonpublic economic sectors for the first time, and codifies policies facilitating the healthy development of the private sector and those working within it, according to Lou Qinjian, spokesman for the third session of the 14th National People’s Congress, the country’s top legislature.

Gordon Lam Chi-wing, a Hong Kong deputy to the NPC and chief supply chain officer of State-owned Sinopec (Hong Kong) Ltd, said the draft law protects many SMEs, especially unicorns whose valuation exceeds $1 billion and those from the technology sphere.

“Many innovations originate from those SMEs,” said Lam, citing examples of Hangzhou-based artificial intelligence startup DeepSeek that stunned the world with its capability of delivering answers with less sophisticated chips. He added that the draft legislation “can better protect their profits with national policy backing, and provide a conducive business environment for them to compete on the international stage”.

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Private businesses contribute more than half of the country’s tax revenue, over 60 percent of GDP and over 80 percent of urban employment, according to official data.

Wilson Pang, a member of the Guangdong Provincial Committee of the Chinese People’s Political Consultative Conference and partner of KPMG China and honorary advisor of CPA Australia, Hong Kong, said, “In the new economy, particularly in new materials, healthcare, life sciences and artificial intelligence, private enterprises contribute a significant proportion of innovation and growth, and they need more support to contribute tremendous value to the country’s economic growth.”

The draft private sector promotion law covers areas such as fair competition, investment and financing environments, scientific and technological innovation, regulatory guidance, service support, rights and interests’ protection and legal liabilities, according to the Ministry of Justice.

“The draft legislation creates a level playing ground where State-owned and private enterprises can compete equally while prohibiting regional protectionism and administrative interference in private business,” said Rock Chen Chung-nin, a Hong Kong deputy to the NPC. 

He added that foreign businesses will have greater confidence in investing on the mainland and be able to focus on their core operations with less regulatory concerns.

Both Chen and Hendrick Sin, another national lawmaker from Hong Kong, said they expect the legal framework to play an active role in attracting Hong Kong enterprises as well as international capital that seek business opportunities on the mainland.

Sin said the new bill potentially “removes more barriers and opens greater opportunities” for Hong Kong enterprises and international capital, particularly from the internet and technology sector, amid the central government’s pledge on deepening reform and opening-up.

Sin, also the co-founder of Hong Kong-listed mobile game publisher CMGE Technology Group, praised the significant progress made by the country in granting Hong Kong investors the same treatment as their mainland counterparts over the past decades.

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The progress speeded up after the mainland and Hong Kong signed the Closer Economic Partnership Arrangement in 2003, which offers wider and easier access for Hong Kong goods and services to the mainland. The Second Agreement Concerning Amendment to the Mainland & Hong Kong Closer Economic Partnership Arrangement Agreement on Trade in Services, which came into effect on March 1, further reduces barriers for Hong Kong services providers to enter the mainland.

Sin said the draft law “provides a stronger legal foundation for Hong Kong’s integration with the mainland” and called for the establishment of an innovation ecosystem with free-flowing resources in data, talent and capital across the boundary. The Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone could serve as a pilot area, he added.

Pang called on Hong Kong to leverage its advantages in talent, financial services, and scientific research to contribute to the Guangdong-Hong Kong-Macao Greater Bay Area’s push to become a technology powerhouse.

The country sees technology and innovation, such as big data and artificial intelligence, as its new growth engine, shifting away from its reliance on investment and exports.

Technology has been the central battleground in China-US tensions. In its latest move, China announced it will increase support for AI model applications and venture capital investment to foster technological breakthroughs and greater self-reliance, according to Wednesday’s Government Work Report.

Responding to the US’ imposition of additional duties on Chinese imports, Nicholas Chan Hiu-fung, a Hong Kong deputy to the NPC, said Hong Kong companies should view the pressure as an opportunity to expand global markets.

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“By facilitating international exchanges and technological collaboration, we can transform challenges into cooperative opportunities,” said Chan, who is also an entrepreneur and partner of international law firm Squire Patton Boggs.

The US trade war has forced some Hong Kong enterprises to relocate their manufacturing lines to places such as Vietnam, he added, citing examples of manufacturing relocation that could benefit Hong Kong enterprises, including setting up operations in Egypt, where they can get easy access to abundant solar resources and lower labor costs, and enjoy tariff-free exports to European markets.

Chan struck an upbeat tone on the future prosperity of Hong Kong enterprises, citing the potential of the city’s joining the Regional Comprehensive Economic Partnership and national policy support.

tianyuanzhang@chinadailyhk.com