Comments on the Draft Revised Government Procurement Law

On behalf of the more than 230 members of the US-China Business Council (USCBC), we appreciate the opportunity to submit comments on the draft revised Government Procurement Law of the People’s Republic of China (hereby referred to as “the Draft”) to the Ministry of Finance. We appreciate the Ministry’s efforts to modernize and standardize government procurement practices.

USCBC received comments from companies across industries including information and communication technology (ICT), equipment and automotive manufacturers, pharmaceuticals, and service firms.

We note that the current Draft has made a few positive changes, compared to the previous version. It calls for standardizing procurement processes, defines several forms of government procurement and their associated rules, and establishes more stringent constraints on usage, quality, and pricing. It also requires timely public reporting of information on government procurement projects. 

However, USCBC and its member companies would like to encourage the Ministry of Finance to take note of multiple issues that could impact foreign companies’ ability to participate in procurement activities. In particular, we would like to highlight the following suggestions:

  • Define domestic goods, projects, and services: Under Article 29, the Draft maintains a long-standing requirement to prioritize domestic procurement of goods, projects, and services whenever possible. However, there is no definition of the term “domestic.” If the State Council interprets this term narrowly in implementation, it could disadvantage foreign companies that manufacture in China and conflict with anti-discriminatory provisions in Article 16 of China’s Foreign Investment Law. We suggest the Draft clearly define domestic goods, projects, and services, and ensure that goods and services provided by foreign-invested enterprises in China are given equal treatment to Chinese companies.
  • Strengthen anti-discrimination provisions: Article 19 prohibits “using local, ownership-based, and other unreasonable conditions” to discriminate against potential suppliers. While we support efforts to prevent discrimination, we think the article would benefit from more specific language and an enumeration of “other unreasonable conditions.” The article does not define the terms “local” or “ownership-based,” and does not explicitly prohibit discriminatory treatment of foreign companies and brands. We recommend guaranteeing that foreign-invested enterprises can participate in government procurement activities under the same conditions as their Chinese competitors, in accordance with the Foreign Investment Law
  • Specify the scope of national security assessments: Article 33 would require procurement that touches on national security to undergo a national security assessment. However, it does not specify which procurement activities or suppliers would trigger assessments, what assessments would entail, or which government agency would administer them. The Ministry of Finance should publicly release more detailed information about the national security assessment system, as well as related standards, processes, and timeframes. Regulators should make pre-applications consultations available to companies and establish an appeals process.

We appreciate this opportunity to express our suggestions, and have provided article-specific recommendations in detail below.