China is actively reemphasizing market forces to enhance corporate efficiency and innovation, S&P Global Ratings said in a Monday release.

Recent initiatives, including the "Opinions on Improving the Modern Enterprise System with Chinese Characteristics" guideline and the "Private Sector Promotion Law," signal the country's intent to expose both private and state-owned enterprises (SOEs) to "greater market rigor," S&P said.

The strategic pivot follows years of efforts to de-risk debt and aims to foster thriving businesses while allowing highly indebted SOEs to fail, according to the rating agency.

S&P expects private firms to gain increased access to capital markets, with their outstanding bonds, currently less than 3.5% of the onshore market, projected to rise.

The government aims to replicate the success of private companies in electric vehicles, chipmaking, AI, and clean energy, allowing them to take the lead in various industries, the rating agency said.