China opens public procurement to foreign companies

August, 2011

The Chinese Ministry of Finance has recently announced the abrogation of three regulations that restricted the participation of foreign enterprises in tendering procedures for public procurement in the country.

The Ministry of Finance of China has recently issued a statement on a major legislative action with which it set out to repeal three regulations for the application of those policies set by the government of "internal innovation."The three regulations in question - "Product Innovation Government Contract Procurement Measures", "Indigenous Innovation Product Procurement Government Budget Measures" and "Indigenous Innovation Product Evaluation Government Procurement Measures" - included the requirement, for foreign companies interested in participating in certain notices tender, to transfer its know-how to the Chinese state company, otherwise they would have been automatically excluded from the races. The rationale of this approach lays the government objective to improve the technological capabilities of domestic industries .
“The repeal of such rules represents a further step in the process of equalization among all the competitors in the public procurement system in China”

Davide Cucino

President of the European Chamber of Commerce in China

The rules, which specifically related to six different sectors including clean energy and supplies of computers, have been officially lifted from July 1, 2011. The repealed provisions are part of the Government Procurement Agreement, the Treaty on Government Procurement of the World Trade Organization in which China is negotiating its accession. The public works sector in China is estimated to around a total of 7,000 billion yuan (over 700 billion euros; report "Public Procurement in China", European Chamber, April 2011). Hence, the importance of the repeal of provisions already in force, limiting significantly the operations of foreign companies. The President of the European Chamber of Commerce in China, Davide Cucino, has welcomed the repeal of such rules "as a further step in the process of equalization among all the competitors in the public procurement system in China." Cucino, in an interview for AgiChina24, reiterated the importance of the intervention in question by declaring that "from now foreign companies with their own research centers in China will see their products equivalent to those ones by China, resulting in the same opportunity to participate and win a contest offered to companies who play at home".