US firms criticise ‘unclear’ Chinese purchasing rules

6 May 2011 | Angeline Albert

US companies are prevented from winning business in China because of bureaucratic and unclear procurement rules.

A report by the American Chamber of Commerce in China (AmCham China), which surveyed 434 US firms based in the country, found 83 per cent want to increase investment there but find themselves hampered by bureaucracy and restrictive government purchasing.

Last month European businesses operating in China made the same complaint, blaming inconsistent and poorly implemented legislation for missing out on up to $1 trillion (£611.4 billion) of new business.

In its 2011 American business in China White Paper, AmCham China reported “sharp increases” in bureaucracy and unclear laws and regulations. It said these challenges were the result of inefficient government and found American businesses continue to experience protectionism.

The representative group urged the repeal of current policies that favour domestic or “indigenous innovation” products in government procurement. US companies believe these policies close a large part of the Chinese market to them.

The US and EU were highly critical of measures that favoured the selection of Chinese companies in certain contracts, prompting a partial retreat by the Chinese authorities.

Although president Hu Jintao has promised future government purchases will not be linked to a supplier’s indigenous innovation accreditation, AmCham-China said “a number of published regulations must be revised” for this to happen.

AmCham China recommended contracts and standard processes be made available to US firms without the need to transfer intellectual property, licences or technology to domestic firms. This would in turn encourage more foreign investment in the economy.

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