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2011-04-21 | All chapters

China's procurement rules hurt EU companies, Chamber says
Bloomberg, 20th April,2011

April 20 (Bloomberg) -- China’s public procurement rules are causing “substantial missed opportunities” for European businesses, the European Union Chamber of Commerce in China said.
     The chamber estimates all forms of public procurement, which includes government purchases and buying by state-owned enterprises and hospitals, is a 7 trillion yuan ($1.1 trillion) annual market in China. Foreign companies are stymied by opaque bidding procedures, spotty enforcement of regulations and local- content rules, the Beijing-based chamber said in a 51-page study released today.
     The study focuses on the wind power, information and communications technology and medical equipment industries. It adds detail to complaints by the U.S. and EU that China’s industrial policy, which aims to nurture national champions in fields such as telecommunications and alternative energy, unfairly hinders foreign companies, adding to trade tensions between the world’s three biggest economies.
     “Sometimes it can seem like pure protectionism, and it is really frustrating,” the chamber’s president, Jacques de Boisseson, told reporters today, citing a complaint from an EU company he didn’t identify. Specific standards and requirements “tend to further exclude foreign bidders from the tender.”
     De Boisseson, who is the chief representative for Paris- based Total SA in China, said many European companies are only given days to prepare bids, are often not given clear criteria on how they were evaluated and are denied the ability to appeal awards they considered unfair.

                   Local Content Requirements

     The report said wind power companies were told they had lost proposals because of local content requirements that were supposed to have been repealed in January 2010, and that bids were often evaluated for initial costs, not taking into account long-term maintenance expenses. A copier/printer machine required four certificates to be eligible for China’s government procurement program, the report said.
     European companies that do business in China and fall under the areas of the report’s case studies include Denmark’s Vestas Wind Systems A/S, the largest wind turbine maker, Paris-based Alcatel-Lucent SA, France’s biggest phone-equipment maker, and Munich-based Siemens AG, which makes wind turbines and medical equipment. De Boisseson declined to say whether these companies participated in the study, saying “the companies involved may have sensitive relations with the government or public entities.”

                    ‘Same National Treatment’

     Chinese Premier Wen Jiabao said last month that foreign companies and their technologies are essential to China’s economic growth. He met with dozens of foreign chief executive officers, including Royal Dutch Shell Plc CEO Peter Voser, on March 21 in Beijing, telling them that their companies “should have the same national treatment” as Chinese companies.
     The EU report said China needs to give “timely access” to bid information to all parties, enforce transparency during the tendering process and work to quickly enter the World Trade Organization’s government procurement agreement. A more transparent procurement process will help combat corruption and ensure China gets the best equipment at the best price, de Boisseson said.
     “Whether they will agree on that or not, well, I hope they will,” he said. “I think we stand a reasonable chance because really, we are convinced that what we say is the right thing for all parties.”