Problems relating to Trade and Investment on China
25. Government Procurement |
|||
Issue |
Issue details |
Requests |
Reference |
| (1) Prioritised Purchase of Domestic Products in Government Procurement | - On 26 May 2009, GOC released Notice on Government Funded Investment Project in the Category of Government Procurement, instructing to give priority to purchase of the domestic products, in the absence of rational reasons such as the project is incapable of domestic procurement. Import of such project is subject to approval of the competent authority. As they now stand, it remains unclear whether the Notice is legally binding or how the actual detailed rules are going to be laid down. - Due to the priority GOC gives to "Made In China" in government procurement, FFEs' participation is either closed out of the bidding or made difficult with additional burdens. |
- It is requested that GOC: -- clarifies the detailed rules of implementation, and -- avoids the spread of these measures to other business sectors. - It is requested that GOC removes the restrictions as soon as possible. |
- Opinions on further strengthening of the supervisory and administrative work for tender/bid on Constitution Project induced by the steady domestic economic growth (NDRC[2009]1361 Appendix) - Measures (unpublished) for Administration of Government Procurement for Domestic Products Articles 3, 6, 7 and 8. - Measures for Administration of Government Procurement for Imported Products - The Government Procurement Law of the People's Republic of China |
| (Action) - On 25 December 2009, GOC promulgated "Catalogue of Industries for Guiding Major Equipment of Independent Innovation" encouraging independent development of equipment industries. This Catalogue identifies 240 items of equipment that GOC desires the domestic industry to develop independently, guiding the domestic industry. Equipment listed in the Catalogue will enjoy every kind of incentive measures in respect of: (1) GOC's Research and Development, (2) Financial Incentive Measures for Products' Commercialisation, (3) GOC' Procurement Policy for Independent Innovation Products and (4) Major Equipment manufactured for the first time in PRC. Basically, this Catalogue will act as a clue to the contents of "Catalogue of the Industries for Government Procurement of Independent Innovation Products" due for promulgation during 2010. - In May 2010, GOC promulgated Proposed Law on Government Procurement of Domestic Products, seeking public comment. It provides the definition of finished products (exceeding 50% of the production cost) and the method of determination. |
|||
| (2) PRC's Pending Accession to WTO Agreement on Government Procurement (GPA) | - GOC's climate and goal are nebulous for accession to WTO Government Procurement Agreement (GPA) (Specifying the scope of application, etc. is desirable, such as exclusion of State Enterprises). | - It is requested that GOC provides and confirms the latest information. | |
| (Action) - On 28 December 2007, GOC filed application for accession to Agreement on Government Procurement (GPA) and made its initial offer. GOC's (currently acting as an observer) negotiation for ratifying GPA has officially begun since the negotiation in February 2008. - In December 2007, GOC filed application (the Initial Offer) for accession to GPA. - On 15 January 2008, Ministry of Finance (MOF) issued Notice stating that the domestic products should in principle be the subject of GOC's government procurement and that procurement of products originating from other countries is prohibited. The Notice also obligates a series of MOF's examination, when any governmental agency imports products from other country(ies). It instructs further that government procurement should priorities transfer of technology and development of human resources, and should seek opinions of National Development and Reform Commission and Ministry of Science and Technology as regards the industries and the weapons, import of which is restricted by GOC. - On 9 July 2010, GOC submitted Revised Offer for its accession to The WTO Agreement on Government Procurement (GPA) The Revised Offer adds 15-Central Government Agencies, although excluding State enterprises and the local governmental agencies, which together represent the major portion of the PRC's government procurement market In addition, GOC has reduced from the Initial Offer the applicable standard amount. - On 11 February 2015, at the informal WTO government procurement committee meeting, PRC rejected the latest amended offer by GPA Signatories (EU/USA, etc.), seeking expansion in the scope of the state owned enterprises. |
|||
| (3) Nebulous Relations between GPA and the Pilot Enterprise Income Tax Policies | - Regulations intertwining between "Government Procurement Policy" and "Independent Innovation" are quite complex. | - It is requested that GOC provides and confirms the latest information. | |
| (4) Losing Substances in Bidding System | - In regard to bidding on equipment, the bidding system is losing its substances, resulting in loss of time and expenses, or else fairness is undermined to the extreme. [Concrete Example] Price negotiation after the fall of the hammer has become habitual. Where the hammer fell at a price much against the will of the buyer, tender is renewed unilaterally. A series of the applicable rules and the flow of the processes remain ambiguous. No significant improvement in particular has taken place since last year as the rules remain ambiguous as before, such as the requisite conditions for the fall of the hammer, the timing for the secondary bid, and the definition for the handling fees upon bidding, etc. While some users were observed, in some instances, to be bidding by a fair, square and transparent process, it is premature to determine if it has grown into a general practice. |
- It is requested that GOC promulgates expressly in writing the tender rules in line with the international rules (that expel any room for human judgement to creep in), clearly laying down the duties and responsibilities of the buyer. | |
| (Action) - On 3 March 2014, MOFCOM promulgated "Implementation Measures for International Competitive Bidding for Mechanical and Electrical Products (for Trial Implementation)", designating the competent authority on international bidding, and defining in separate table, complete with HS Codes, the scope of the mechanical and electrical products subject to international bidding, and their exceptions. -- Order No. 1 [2014] of the Ministry of Commerce [in Chinese] _(http://www.mofcom.gov.cn/article/b/c/201403/20140300504579.shtml). |
|||
| (5) Necessary Bidding Qualifications & De Facto JV Requirement | - The bidding scheme requires satisfaction of multiple qualifications even for introduction of a single system. It is extremely difficult to satisfy these qualifications. In addition, high-grade qualification is restricted to entities with deep interest with the Government. In fact, establishment of a joint venture company is prerequisite to bid for large governmental tenders. Establishment of a joint venture company equals demand for transfer of technology. It seems, in substance, it ends up merely by transferring technology without yielding substantive profit. | - While the political relations with both governments do play a role, it is requested that GOC enables Japanese consortium to bid for large government tender. | |
| (6) FFEs' Participation is difficult in Government Projects | - Foreign funded enterprises (FFEs) are denied of participation in Projects above the Municipality level, such as Programme 863 (State key basic research development programme). | - It is requested that GOC overhauls the policy to allow FFEs participation in projects with a low level of confidentiality requirement. | |
| (7) Excessive Demand of Materials in Government Procurement | - GOC requires overseas' manufacturers submission of various materials twice a year. Apart from "certified copy of the entire register" and "certificate of authorized representative", GOC also requires "attorney's certificate," the thrust of which is ambiguous. Moreover, GOC requires notarization issued by legal affairs bureau, Authentication certificate issued by China embassy in Japan. Authenticity is already imbedded by itself in "certificate of all present matters" or "representative certificate", issued formally by Japanese Government authority. It must be questioned as to the necessity of private attorneys' certificate, legal affairs bureau's authentication, and embassy's attestation. Deepening appreciation is desirable between GOC and GOJ as to the differences in legal system. The submission deadline of 15-business days is severe: in practice, within 13-15 business days. All submission materials require certification, etc. at governmental authority (of Japan and/or China Embassy in Japan). During the days around new year, due to the closure of offices in both China and Japan authorities, it becomes even more difficult to meet the submission deadline. |
- It is requested that GOC ensures that: --Materials for government procurement suffice by submission of "ertificate of all current matters" and "representative's certificate", obviating the need for "attoney's certificate", while dispensing with legal affairs bureau's notarisation, and authentication by China embassy in Japan, --Submission of all the foregoings, only once a year, not twice, and --Expansion of the material submission deadline to 20-working days. |
- Administrative Measures for the Government Procurement of Domestic Products, Articles 3, 6, 7 & 8 - Administrative Measures for the Government Procurement of Import Products |
<<BACK |