In July, the WTO conducted its ninth review of China’s trade policies and practices, including those relating to government procurement. At the conclusion of the Trade Policy Review (TPR), the chair, Nigerian Ambassador Adamu Mohammed Abdulhamid, summarized the main issues as well as members' concerns and expectations. On procurement, he noted the need to expedite China’s accession to the Government Procurement Agreement (GPA), the closure of important sectors to foreign firms, and that Chinese entities are encouraged to reduce their purchase of imported high-tech inputs and favor domestic producers. This post examines the key procurement elements of the TPR.
China applied for accession to the GPA in December 2007, in accordance with a commitment—to initiate GPA accession negotiations—that it made when it became a WTO member in 2001. China submitted its most recent market access offer, its sixth revised offer, in 2019.
In its TPR statement, the European Union lamented the “regrettable lack of progress” in China’s GPA accession. The Director General of China’s Ministry of Finance responded that China was committed to joining the GPA as soon as possible, contending that its accession had been delayed “due to the excessive and unreasonable requests of some GPA parties.” The official also indicated that “China is considering the feasibility of submitting an eighth offer but emphasized that it cannot join the GPA only through “unilateral efforts” and hoped that the GPA parties would be pragmatic in their requests.
The EU statement also emphasized “increased concern over non-public guidelines encouraging Chinese entities to reduce or eliminate imported products or inputs, particularly in procurement procedures,” singling out the impact on the medical devices, software, and semiconductors sectors. It expressed the overall concern that China was stepping back “from a more transparent and less discriminatory public procurement framework.”
The United States, in its statement at the conclusion of the TPR, also cited non-public government procurement guidelines that are discriminatory as one of the notable concerns raised by members. (The US did not make any reference to China’s GPA accession negotiations in its formal statements at the TPR.)
Regarding discrimination in Chinese procurement, the WTO Secretariat’s TPR report cited provisions in China’s Government Procurement Law that provide for more favorable treatment of domestic goods, services, and suppliers than that accorded to imported goods and services and foreign suppliers. One is Article 10 of the GPL that require procuring entities to procure domestic goods, construction, and other services, unless an exception applies. The exceptions include the non-availability of domestic goods or service or where otherwise provided for by other laws and administrative regulations.
China also requires preferential treatment for domestic small and medium-sized enterprises (SMEs). For example, in 2022, the Ministry of Finance directed procuring entities to strictly implement government procurement policies to support SMEs and increase price preferences for SMEs and the share of set-asides for SMEs. According to Chinese authorities, SMEs undertake about 75% of China’s procurement.
The Secretariat noted that China had not made any major changes to its legal and institutional framework concerning government procurement since the previous TPR in 2021. It had, however, issued a number of measures (cited in the report) to implement its main procurement laws. China continues to work on revisions of both the Government Procurement Law, which was issued for public comments in both December 2020 and July 2022 and the Bid Invitation and Bidding Law (Tendering and Bidding Law), which began with an invitation for public comment in December 2019. The National Development and Reform Commission submitted a revised draft reflecting comments to the State Council for review in July 2020. Neither revision has been implemented.
The TPR Chair concluded his remarks on procurement highlighting as a growing concern, the "perceived trend towards import substitution and self-sufficiency by China."
Jean Heilman Grier
August 1, 2024
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