China's first fundamental law dedicated to promoting the private sector came into effect Tuesday, strengthening legal protections and injecting fresh momentum into a key driver of the world's second-largest economy.

The Private Sector Promotion Law, passed in late April, aims to optimize the development environment for the sector, ensure fair market competition, and promote the growth of both the private economy and private entrepreneurs.

It clearly states that the private sector is "an important part of the socialist market economy," and promoting its sustained, healthy and high-quality development is a significant and long-term policy.

This legislation marks a milestone in the development of the sector, which contributes more than 60 percent of China's GDP.

"The law demonstrates the country's long-term commitment to the private sector, and is expected to further unlock its innovation potential and reinforce the confidence of private entrepreneurs," said Wen Bin, chief economist at China Minsheng Bank.

From ensuring fair market access and financing support to enhancing services and protection of original innovation, the 78-article law cements efforts to encourage, support and guide the growth of the private sector.

The private sector has become a prominent part of China's economy thanks to a nurturing policy environment, which has led to it driving innovation, employment and overall economic growth.

Private firms make up more than 90 percent of the country's total enterprises and more than 80 percent of urban employment. They have also become key players in China's push for innovation-driven growth, contributing to more than 70 percent of the country's technological innovation achievements.

Experts and business leaders view the law as "highly timely and absolutely essential." It comes as China revs up efforts to bolster the private sector and the broader economy, as the country tries to navigate external shocks and domestic development challenges.

Private firms are facing mounting pressures, including international trade barriers, weak domestic demand and the pressing need for industrial transformation and upgrading, but opportunities coexist alongside these challenges, said Cheng Xiaobo, chairman of Lifang Group, a vision tech firm headquartered in Shanghai.

With the legal safeguards and a focus on core tech breakthroughs, and by capitalizing on China's emerging new consumption scenarios, private firms are better positioned to turn the headwinds into tailwinds, Cheng added.

"The rule of law is the best business environment," said Qi Xiangdong, chairman of cybersecurity firm Qi-Anxin and vice chairman of the All-China Federation of Industry and Commerce, noting that the law transforms policy support into legal guarantees.

The legislation follows a series of pro-business measures rolled out this year. In February, China held a high-level symposium on private enterprises, which was widely viewed as a strong signal to boost the confidence and growth of the private sector.

A month later, at the "two sessions," the country reiterated support for private enterprises, vowing to take effective moves to stimulate the vitality of all market entities.

China is also beefing up financial support for the private sector, and working to level the playing field. Last month, a new version of the market access negative list was unveiled, specifying fields that are off-limits to both domestic and overseas business entities. The new negative list reduced the number of items on it from 117 to 106.

Executives of high-tech private firms particularly welcomed the law's focus on tech innovation and enhanced protection for original innovation and intellectual property rights.

Han Dongcheng, chairman of Anhui Easpeed Technology Co., Ltd., a firm focusing on holographic imaging technology, said the law served not only as an incentive for tech firms like his, but also as a strong institutional safeguard, enabling firms to focus on research and development with greater confidence in defending their achievements.

Similarly, Tan Limin, chairman of Westwell, a Chinese tech firm that develops AI applications and autonomous driving solutions, highlighted the law's broader significance. From ensuring a more level playing field, enabling fairer market competition, to encouraging innovation and enhancing intellectual property protection, "the law delivers concrete safeguards for private businesses and bolsters confidence for both their daily operation and long-term growth," Tan said.

Backed by follow-up policies and stricter enforcement, the law will further improve the business environment, unleash private-sector vitality, and promote the forging of a new development paradigm, cementing its role as a legal cornerstone for high-quality development of the private economy, said Wen of China Minsheng Bank.