Legislature seeks input on Government Procurement Law
China is committed to a fair and open government procurement process...at least in principle.
On June 26, China's legislature opened a 30-day public comment period for the draft revision of the Government Procurement Law.
Some context: The law sets the rules for how companies bid for government contracts, a market worth over RMB 3 trillion a year.
For the first time, the draft writes fair competition principles into the statute (NPC):
- It guarantees all business entities "equal participation" and bars anyone from illegally restricting or obstructing suppliers from entering a local or sectoral procurement market.
- The draft also specifies that bidding qualifications must tie into expected performance rather than arbitrary requirements aimed at keeping otherwise qualified bidders out.
However, the law also gives the government direct power to ban suppliers "legally restricted or prohibited" from bidding.
Sound familiar? The finance ministry used this power for the first time against US defense contractors last week.
Get smart: The equal access pledge is a plus for business in principle, but the devil is in the details.
- By reserving the right to ban certain bidders through legal mechanisms like the supply chain security regulations and the counter-extraterritorial jurisdiction rules, Beijing is signaling that geopolitical tension can still cost foreign firms contracts.
Get smarter: As geoeconomic tensions grow, we expect foreign suppliers will be increasingly pressured to agree to supply chain continuity commitments.
- A pledge not to cut off supplies mid-contract is a legitimate ask for buyers, but it's one that foreign manufacturers exposed to US export controls can't credibly make.
- This means the requirement can serve either as a genuine safeguard or as a convenient excuse to keep foreign bidders out.