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2011-07-06 | All chapters

European firms hail Beijing's U-turn on public procurement policy

Europolitique, 4th July2011

EU companies operating in China have welcomed Beijing's recent decision to drop three key discriminatory policies in the field of public procurement. "The repeal should be welcomed as a step forward towards levelling the playing field in the government procurement market in China," said Davide Cucino, president of the European Union Chamber of Commerce in China (EUCCC), on 30 June. The repeal of three national indigenous innovation-related policies announced by the Ministry of Finance entered into force on 1 July.

These three documents had called upon the Chinese central and provincial governments to develop specific calls for proposals reserved for companies developing "indigenous innovation". This approach was part of an ambitious strategic plan to foster innovation within the Chinese economy. "As such [these policies] obstructed the access of European companies to the government procurement market in certain areas," said the EUCCC.

Beijing's backtracking is seen as a victory for EU firms operating in the country and the result of persistent lobbying from the European side. The repeal of these three policies will ensure for European firms operating in the country that products manufactured under license from their parent companies are able to compete in public tenders. The decision is "especially important because it is addressed to all levels of government departments, including the provincial and municipal levels," said Paul Ranjard, chair of the IPR Working Group.

China's U-turn is seen as another encouraging sign for European businesses. Last year, Prime Minister Wen Jiabao made a promise that foreign firms would not be discriminated against by national legislations, amid concerns that China's new economic strategy would aim at building national champions at the expense of foreign investors. "We support China's efforts towards developing its own technology and innovation. However, science and technology development plans aimed at encouraging innovation should not be developed in ways that distort fair market practices," said Cucino.

Background

European firms operating in China have been complaining for a long time about their limited access to the Asian country's public procurement market. Central and local governments spend at least seven billion euro a year on public contracts in order to meet their ever growing need for infrastructures. European firms complain they only have access to a tiny slice of a cake worth 20% of China's GDP. There is a "lack of transparency in the process at all levels," said a report from the EUCCC released last April. "China continues to face challenges in implementing a consistent and transparent approach to procurement across all levels of government," confirmed the World Trade Organisation in its trade policy review published in 2010.