The new regulation aims to help better oversee the burgeoning online government purchasing market, cut costs and raise purchasing efficiency, said senior city officials.

Besides the new regulation, the city plans to quickly update its current legal framework regarding government procurement through revision of local regulations.

The update is an urgent need that echoes the newly issued State-level government procurement law, the first of its kind in China designed to curb corruption and ensure fairness, according to Zou Huaxin, director of the city government's procurement center, which handles major local government purchasing activities.

"We have to create a reliable legal footing for further growth of the market," he said.

Official statistics indicate that local government procurement expenditures hit 2.08 billion yuan (US$250 million) in the first half of this year, a nearly 45 percent growth over the same period of 2001. The statistics also show that 143 million yuan (US$17 million) in budgeted purchasing funds were saved during that time.

Mainly based on a public bidding system, the total Shanghai government procurement volume amounted to some 4.59 billion (US$553 million) in 2001, and the city expects an increase of 50 percent this year.

Seeing the market's continuous growth and the involvement of an increasing number of suppliers, the city government is considering the establishment of a supplier credit record system, according to Zou.

Scheduled to be launched later this year, the system aims to provide purchasing agents with a reliable track record of the involved suppliers based on their past performance in local government procurement activities.

"As an integrated part of a social credit system, it hopefully will help establish a standardized and trustworthy platform for all the suppliers," Zou noted.

Such a move is, in fact, a further improvement of the city government's procurement system, which has been taking shape since 1995.

In addition to a series of regulations, the city has set up a panel of nearly 500 non-governmental consultants that will share their professional know-how with procurement decision makers.

Also, Shanghai recently invited 12 well-known local public figures, ranging from university teachers to company executives, as special social supervisors overseeing the city's government procurement activities.

However, insiders say a lot remains to be done.

"We urgently need more professionals in the area with ample experience and intimate knowledge of international practices. The after-sale service of involved suppliers should also be improved," said an official from the Shanghai Municipal Finance and Taxation Bureau, who refused to be named.

(China Daily August 5, 2002)