Government Procurement and Sales to State-Owned Enterprises in China

The Chinese government has set its sights on reforming its several-trillion-dollar public procurement environment to offer greater transparency and equal treatment to foreign companies, building on improvements over the last decade. Despite these efforts, US companies still report significant challenges achieving fair and equal access to procurement opportunities in China compared to Chinese private and state-owned enterprises (SOEs). This suggests a disconnect between the encouraging rhetoric from the highest levels of the Chinese government and the procurement decisions made on the ground. These challenges are exacerbated by both deteriorating US-China relations and by China’s failure to join the World Trade Organization’s (WTO) Government Procurement Agreement (GPA), which requires countries to provide equal treatment to foreign and domestic suppliers when it comes to government procurement and sales to covered SOEs.

Key challenges

  • Domestic substitution: Chinese government entities and SOEs have begun replacing foreign products and components with those of majority Chinese-owned companies headquartered in China. This is particularly prevalent in sensitive sectors, such as information and communication technology (ICT), health care, and advanced technology and equipment, though it is becoming more common in several other sectors. Some procuring entities explicitly state that they will not accept imported products in tender documents, while others informally express preferences for local brands during the bidding process.
  • Unclear domestic content requirements: Under Chinese law, products that are made in China are eligible for preferential treatment in government procurement. However, China has not specified what kinds of products qualify as made in China, resulting in inconsistent treatment. For some government entities, domestic products can include goods manufactured by foreign-owned companies in China. For others, the term only includes goods affiliated with Chinese brands that are majority Chinese owned and headquartered in China.
  • Broad security criteria when evaluating bidders: ICT and specialized equipment suppliers report that security factors weigh heavily in procurement decisions, which often disadvantages foreign companies. Government entities and SOEs in power generation, telecommunications, and other sectors increasingly prioritize security but do not have transparent standards or metrics to assess suppliers. It is difficult for foreign-invested enterprises (FIEs) to receive a competitive score, as Chinese customers consider them to carry inherent security risks.

Common strategies

  • Work with a local partner: In many cases, USCBC members have found that joint ventures (JVs) with majority Chinese ownership are more likely to succeed in government procurement and sales to SOEs. FIEs across sectors use JV partners or local distributors to facilitate bidding and avoid the potential disadvantages that come with being a foreign brand.
  • Manufacture locally and receive certifications: A strong local presence can improve customers’ willingness to source from foreign suppliers and address some of their concerns about the long-term reliability of US companies. Most companies noted that expanding local research and development investment, manufacturing facilities, hiring, and tax contributions can be helpful. Companies also recommend pursuing certifications that label products as locally manufactured. These include industry certifications, such as cryptography and other security certifications for the ICT sector, as well as written endorsements from municipal and provincial governments. These certifications are only available for goods that are produced in China.
  • Raise issues with provincial leaders: Many companies consider provincial government leaders to be their best resource. In some cases, when companies have raised issues of exclusion or unfair treatment as foreign brands, officials have addressed the issues with local customers and forced departments to retract unfair guidance.


Read the executive summary in Chinese:  

政府采购报告概要部分 - 中文


Read the full report: