美中贸易全国委员会-中国国有企业的政府采购和销售（英）-2021-27页_1mb

Summary of Government Procurement and Sales to State-Owned Enterprises in China

Core Content

This report analyzes the challenges and best practices for U.S. companies participating in government procurement and sales to state-owned enterprises (SOEs) in China. It highlights the disparity between the government's stated goals of transparency and equal treatment for foreign suppliers and the actual procurement practices that often favor domestic companies.

Main Challenges

• Domestic Substitution: Chinese government entities and SOEs increasingly prefer domestic products, particularly in sensitive sectors like ICT, healthcare, and technical equipment. Some tenders explicitly exclude imported products, while others show informal preferences for local brands.

• Unclear Domestic Content Requirements: There is no official definition of what constitutes a "made in China" product. Some entities consider any locally manufactured product, regardless of ownership, as domestic, while others only recognize products from majority Chinese-owned companies.

• Opaque Security Assessment Criteria: Security concerns are a major factor in procurement decisions, especially in ICT and specialized equipment. However, the criteria for assessing security risks are not transparent, leading to unfair treatment of foreign companies.

• Inconsistent Implementation Across Provinces: Local governments apply procurement rules inconsistently, with central and western regions more likely to exclude foreign bidders. This creates a fragmented market and disadvantages foreign companies.

• Slow Public Posting of Tenders: While the Government Procurement Law mandates public tendering, some procurement processes are rushed, with tenders posted and negotiations concluded in as little as two weeks, leaving foreign companies at a disadvantage.

• Administrative Burdens for Foreign Companies: Foreign companies often face additional documentation and approval requirements to justify the purchase of imported products, which can be burdensome and time-consuming.

Key Points on Legal Framework

• China's Government Procurement Law and Tendering and Bidding Law regulate procurement and tendering, respectively. These laws have undergone revisions in 2019 and 2020 to align more with global standards, though concerns remain about provisions that favor domestic products.

• The Foreign Investment Law (2020) aims to ensure fair treatment for foreign-invested enterprises (FIEs), but it only guarantees equal treatment if FIEs manufacture goods in China, not if they source from abroad.

• China has not joined the WTO Government Procurement Agreement (GPA), which would require equal treatment for foreign and domestic suppliers. This exclusion limits legal recourse for foreign companies facing unfair treatment.

Common Strategies

• Collaborate with Local Partners: U.S. companies often form joint ventures (JVs) with majority Chinese-owned companies to increase their chances of winning bids.

• Local Manufacturing and Certification: Establishing a local presence and obtaining certifications that label products as "made in China" can help foreign companies overcome skepticism and gain trust.

• Engage with Provincial Leaders: Some companies have found success in raising concerns with provincial officials, who can sometimes intervene to address unfair treatment.

Sensitive Industries

• ICT Sector: U.S. companies in the ICT industry face significant challenges due to security concerns and the push for technological self-sufficiency. Procurement decisions often prioritize "secure and controllable" technology, which lacks a clear definition.

• Healthcare Sector: Medical device and consumables suppliers encounter barriers such as exclusion of imported products, strict local content requirements, and lengthy approval processes. Some cities and provinces have published lists of eligible imported products, which are becoming increasingly limited.

• Technical Equipment: Companies supplying specialized equipment face similar issues, with procurement decisions often influenced by security and domestic content preferences.

Prospects and Recommendations

• Continued Disparities: Despite legal reforms, the procurement environment remains challenging for U.S. companies due to inconsistent implementation and domestic substitution policies.

• Need for Clear Definitions: There is a clear need for an official definition of "made in China" products to reduce ambiguity and ensure fair treatment.

• GPA Accession: China's attempts to join the GPA have been met with skepticism, as its bids are seen as inadequate. Accession would provide a more transparent and equitable framework for foreign suppliers.

• WTO Commitments: China is bound by WTO rules related to SOE procurement, which require non-discriminatory treatment. However, in practice, these commitments are not always respected.

Conclusion

U.S. companies continue to face significant challenges in accessing the Chinese government procurement market, despite legal reforms and government statements promoting transparency and equal treatment. The core issues include domestic substitution, unclear domestic content definitions, opaque security criteria, and inconsistent local implementation. Companies are increasingly relying on local partnerships, local manufacturing, and engagement with provincial authorities to navigate these challenges.