The government may put foreign suppliers on equal footing with Chinese producers in years to come, and a new program is searching ways on how or when the government procurement market will open.
As part of its commitments to the World Trade Organization, China is preparing to start negotiations to join the Government Procurement Agreement (GPA) in the next few years. The GPA allows companies from any of the members to bid for government procurement contracts in other members.
China, however, faces some obstacles, including a national law which calls for billions of yuan in government purchases to go to domestic goods and services whenever possible.
A task force was set up a year ago to start planning for the upcoming negotiations for GPA membership, said Yu An, a task force member and a law professor at Tsinghua University's School of Public Policy and Management.
The task force has launched a research program, headed by Yu, to find out how the GPA fits within the Chinese context and how to approach the negotiations for membership.
Those negotiations will depend largely on the research results, Yu said, but added that the start of the program shows China plans to open the government procurement market.
When China gained access to WTO in 2001, it promised to initiate negotiations for membership in the GPA "as soon as possible."
China did not sign the GPA in 2002, but became an observer with the future goal of becoming a member. Prior to becoming a member of the GPA, China will not be required to give foreign suppliers such equal access.
Yu said China's entry into the GPA is complicated, as China already has a law, which took effect in 2003, on government procurement.
The Law of the People's Republic of China on Government Procurement regulates government purchase practices at all levels.
It stipulates that government procurement shall target only domestic commodities and services except when they are unavailable or cannot be obtained under reasonable commercial conditions within the territory of the Chinese mainland or when they are needed outside of the mainland.
The law does not define domestic Chinese goods, works and services, leaving the task to the State Council.
"To become a full member of the GPA, our legislature will consider revising our Procurement Law," said Yu.
Many overseas businesses have been keen to get a piece of China's huge procurement market, whether by supplying goods and services to large infrastructure projects such as Beijing Olympics-related projects or by participating in local governments' procurement activities.
In 2000, China's total government procurement was 32.8 billion yuan (US$4 billion).
In 2003, however, China's total government procurement soared to 165.9 billion yuan (US$20 billion), five times as much as 2000 and an increase of 64.4 percent over 2002, according to statistics provided by the Ministry of Finance.
In the coming years, government purchases and contracts are expected to grow even more due to China's booming economy. China's GDP grew 9.5 percent in the first nine months of the year.
The timing for the start of the working group is not accidental.
"The reform on the investment system initiated in the first half of this year lays down a solid institutional basis for China's government procurement practices," said Tong Jiadong, a professor of economics from Nankai University and director of the university's WTO Research Center.
"China's opening up its procurement market is a natural extension of this reform," Tong said.
In July, the State Council promulgated a Decision on Reform of Investment System as a guiding document for the transformation, the core of which is to give a full play to the market in terms of resource allocation by relieving enterprises of government intervention.
The reform also aims to standardize government investment operations, making government-funded projects more productive and using bids to decide on investments.
The reform would also create a better institutional environment for foreign investment in China.
Premier Wen Jiabao stressed that pushing this reform forward is of great significance for a perfect socialist market economic system and more effective macro-control.
"China's intention to join the WTO Government Procurement Agreement reflects the Chinese Governments determination to accelerate China's integration into the world market economy," Tong said.
(China Daily November 8, 2004)
