New European Chamber Study Calls on Continued Reform of China ’s Fragmented Public Procurement System
The European Union Chamber of Commerce in China launched a unique new study examining China ’s public procurement market on April 20, 2011. Titled Public Procurement in China: European Business Experiences Competing for Public Contracts in China, the study is the first ever business-led report on public procurement in China .
The study estimates that the overall public procurement market in China represents over 20% of the country’s rapidly growing economy.
The regulatory framework governing this enormous and increasing amount of economic activity is fragmented, i.e. inconsistent and unevenly implemented. This is a significant drag on efficiency and innovation for the Chinese economy as a whole and leads to substantial missed opportunities for European business in China .
Said European Chamber President Jacques de Boisséson, “Our study starts by showing how large a market public procurement in China is overall. Currently European companies are barred from much of this estimated US$1trillion market through poor implementation of overlapping regulations. It is vital that this enormous market be regulated in a transparent and non-discriminatory way. This will ultimately support the goal of higher quality growth, as set out in the recently approved 12th Five Year Plan. This study aims to offer possible next steps to make this happen.”
Common challenges encountered by European business when competing for public contracts in China include (among others):
- Difficulty in obtaining timely, accurate information about upcoming projects
- Lack of communication of detailed evaluation criteria for projects
- Trend towards decentralization of tender information leading to more costs, less transparency
- Unfair implementation of public procurement awards
- Unsatisfactory appeals procedures
Said Gilbert Van Kerckhove, Chair of the European Chamber Public Procurement Working Group, “The Chamber has been working with the Chinese authorities to continue improving the procurement framework in China since 2004. European companies could contribute even more to support Chinese government plans, especially in areas of expertise such as transportation, civil engineering or renewable energy. For this to happen however, they need to be allowed to compete for public procurement in China . This means fixing the little things, often at the local level, which get in the way of healthy competition.”
The fifty-page study offers a detailed analysis of the typical tendering process and non-market barriers encountered by European companies bidding for public contracts. Three sectors provide examples of Public Procurement in China : medical devices, ICT and windpower equipment.
Drawing on the knowledge and experience of the European Chamber’s 1,600 member companies, Public Procurement in China : European Business Experiences Competing for Public Contracts in China concludes by making a series of constructive, concrete suggestions. These aim to improve the legal framework for public procurement in China , as well as its implementation in the short-, mid- and long-run. Such reform would bring immediate benefits to the Chinese economy as a whole and to the European business established in China .
Improved regulation would also accelerate Chinese companies’ grasping the opportunities presented by accession to the WTO Government Procurement Agreement.