Chinese government relaxes domestic buying rules

30 June 2011

30 June 2011 | Angeline Albert

China is to ditch some of the "indigenous innovation" rules for government purchases that prevent foreign companies winning public deals.

The Chinese Ministry of Finance (MOF) has announced from 1 July three regulations that connect government purchasing to domestic innovation rules will be scrapped.

Previously, buyers were only allowed to award contracts to suppliers who could prove their product and its parts were made in China. From tomorrow, purchasers will be able to award contracts to vendors regardless of the product’s origin. The innovation restrictions, introduced in 2007, had made it difficult for foreign companies to gain access to government deals.

The announcement was welcomed as “a step in the right direction” by the US-China Business Council (USCBC), which represents 240 US companies doing business in China. It had highlighted these rules as a problem during talks with the Chinese government earlier this year.

USCBC president John Frisbie said in a statement: "The MOF notice is directed to all central and local government agencies, an important development given that companies encounter indigenous innovation policies and barriers to sales at multiple government levels.

“Though the measures represent only a portion of the full list of regulations that tie indigenous innovation and government procurement, the elimination of these measures is an important step toward fulfilling pledges made by [Chinese] leaders.”

During his January visit to Washington, Chinese president Hu Jintao said his government would not discriminate against products made with foreign technology when awarding government procurement contracts.

In April, the EuropeanUnion Chamber of Commerce in China (EUCCC) said China’s public procurement laws caused European companies to miss contract opportunities in the country worth $1 trillion (£611.4 billion).

A survey by the American Chamber of Commerce in the People’s Republic of China the month before found 57 per cent of US firms doing business in China had expected to lose business as a result of the “indigenous innovation product accreditation” policy, and 37 per cent said they had already lost business.

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