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China’s private firms back in driver’s seat as regulations ease: Goldman Sachs

Homepage > China’s private firms back in driver’s seat as regulations ease: Goldman Sachs > China’s private firms back in driver’s seat as regulations ease: Goldman Sachs
China’s private firms back in driver’s seat as regulations ease: Goldman Sachs
Published in 18 June, 2025
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“The tide has turned” for China’s private enterprises, said analysts with Goldman Sachs, as regulatory restrictions are being lifted to help non-state firms pursue breakthroughs in cutting-edge technology and expand their international presence.

The private sector’s “animal spirits” are making a return, with investment patterns suggesting a renewal led by capital expenditure, more aggressive overseas expansion plans, research and development spending and heightened fundraising activity, the investment bank said in a report published on Sunday.

“The sustainability of the rebound hinges largely on more predictable policy and regulatory frameworks, forceful macro stimulus to circuit-break disinflationary expectations and more stable US-China relations,” researchers said.

China’s private sector accounts for roughly 60 per cent of the country’s gross domestic product and 80 per cent of urban employment. It contributed to two-thirds of national tax revenue in 2024, but only received 30 per cent of outstanding bank loans in the same year, the report said.

The sector bore the brunt of nearly three years of strict pandemic restrictions, as well as wide-ranging regulatory crackdowns on industries like real estate, technology and private tutoring.

This year, however, Beijing has telegraphed its support to the private sector as the country turns inward for economic momentum amid an intensifying economic rivalry with the United States.

In February, President Xi Jinping hosted a meeting with China’s top entrepreneurs – the first gathering of its kind since 2018.
Two months later, the country’s top legislature passed its first-ever law on promoting the private economy and protecting the legal rights of private firms.
Chinese President Xi Jinping holds rare meeting with China’s top entrepreneurs amid US tech rivalry

“The new law is incrementally helpful in boosting entrepreneurs’ confidence and expectations, in our view,” Goldman Sachs said.

The regulatory cycle has reached an inflection point for the private economy, analysts said, with policy focuses also materially changing.

“The [regulatory environment] has significantly loosened since reaching a peak in late 2021, and is now at the most accommodative levels in the past five years.”

Artificial intelligence (AI) has been significant, the investment bank said, with Chinese platforms – particularly DeepSeek’s large language models – seen as globally competitive and cost-effective, and the private sector playing a major role in their success.

“AI optimism has begun to reinvigorate private-owned enterprises’ investment appetite.”

As risks of a full US-China decoupling intensify in the second term of US President Donald Trump, Beijing’s private firms are spearheading the country’s efforts to diversify to other overseas markets.

“[Private-owned enterprises] are leading the charge for China’s ‘going global’ ambition, allowing them to grow organically, enjoy higher margins and diversify away from the immensely competitive domestic market,” Goldman’s researchers said.

Private companies have also helped the country’s industries move up the value chain and diversify their offerings, with analysts saying firms now have an opportunity to market their higher-ticket items internationally.

In South China Morning Post