Indigenous Innovation and Procurement Progress Report 2014

Executive Summary

PRC officials made a series of commitments in 2011 to break existing links between indigenous innovation and government procurement preferences – a significant concern for the US-China Business Council and its member companies. These included a State Council notice, issued in November, requiring provincial and local governments to halt implementation of any measures that link innovation and government procurement within regulatory documents, to review existing regulatory documents for provisions that may need to be eliminated, and to report results to the State Council before the end of December 2011.

Not all such sub-national governments have yet announced their compliance with these requirements. To facilitate continued discussion on China’s full implementation of its pledges, USCBC is regularly updating a report covering the central, provincial, and local policy changes on indigenous innovation. This report is designed to ensure full implementation of China’s commitments at the provincial and local level since January 2011, with a particular focus on those documents released since the November 2011 notice.

• As of May 2014, 19 provinces have released notices and announcements to comply with central government requirements. Fourteen provinces—Anhui, Beijing, Chongqing, Guangdong, Guizhou, Hebei, Hunan, Inner Mongolia, Jiangsu, Jiangxi, Jilin, Liaoning, Tianjin, Xinjiang, and Yunnan— have complied to some degree after the November State Council notice was issued. An additional 4 provinces — Fujian, Gansu, Shandong, and Shanghai —did so before the notice.
• An additional 39 sub-provincial units—ranging from Chengdu, Sichuan to Wuxi, Jiangsu—have issued notices and announcements to comply with central government requirements.
• However, significant work still remains: 12 provinces have not released any measures since January 2011 to implement central-level pledges, including some notable locations where foreign companies have investment such as Sichuan and Zhejiang provinces.
• In addition, USCBC has found seven local regulations formally linking indigenous innovation and government procurement released even after such links were prohibited by the State Council’s November 17 notice, suggesting that further vigilance is needed on these issues.
• USCBC recommends that US government officials continue to raise this issue to ensure full and consistent compliance, including at the Strategic & Economic Dialogue, Joint Commission on Commerce and Trade, and other relevant bilateral meetings.