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Focus on Regulation

Reforms for China’s public procurement regime expected in 2020

On 27 February 2020, China’s Ministry of Finance (“MOF”) published its legislative agenda for 2020 and released a plan to amend a series of laws and regulations regarding public procurement (see here).  As China is speeding up the negotiation process for its accession to the Agreement on Government Procurement (“GPA”) within the WTO framework, significant changes to modernize the public procurement system are expected.

China’s current public procurement regime is governed by two main laws. On the one hand, the Government Procurement Law (“GPL”), administered by the MOF, governs purchasing activities conducted with fiscal funds by state organs and other organizations at all levels of government in China. On the other hand, the Tendering and Bidding Law (“TBL”) falls under the jurisdiction of the National Development and Reform Commission (“NDRC”) and imposes uniform tendering and bidding procedures for certain classes of procurement projects in China, notably construction and works projects, without distinguishing based on the type of entity that conducts the procurement.

The MOF plans to amend the GPL and a number of implementing rules in 2020, in particular the Government Procurement Law Implementation Regulation, as well as other important administrative measures, such as the Framework Agreements in Government Procurement Administrative Measures, Non-Public Bidding Procurement Methods in Government Procurement Administrative Measures and the Tendering of Goods and Services in Government Procurement Administrative Measures.

Some reforms have already been implemented. For instance, in July 2019, the MOF issued the Circular on Promoting Public Procurement and Optimizing the Business Environment (see here), which prohibits unfair restrictive practices in government procurement, such as discriminatory treatment relating to private, foreign or domestic companies, requirements on the size/business track record period for potential bidders, untimely or insufficient public disclosure of the tendering information, and so forth. In December 2019, the MOF amended the Publication of Government Procurement Information Administrative Measures (see here), setting out detailed requirements to enhance the effectiveness, sufficiency and transparency of tendering information publication.

As for NDRC, similar legislative efforts are underway. In August 2019, NDRC, along with seven other relevant ministries, launched the Special Rectification Work Plan for the Business Environment in Tendering and Bidding for Construction Projects (see here), aiming to remove unreasonable restrictions and barriers in the bidding processes for construction projects. On 3 December 2019, NDRC published draft amendments to the TBL for third party comments (see here). The draft amendments focus on both substantive and procedural changes to address legislative loopholes based on past practices and to enhance the efficiency, transparency and fairness of bidding processes.

As mentioned, one of the drivers for the reform of the public procurement regime is China’s ongoing negotiations to join the GPA, which is a multilateral trade agreement within the WTO framework, requiring open, fair and transparent conditions relating to competition to be ensured in government procurement involving GPA member countries. China’s accession to the GPA would open up significant business opportunities not only for Chinese companies abroad, but also for foreign players in China. In particular, foreign companies would gain better access to the giant government procurement market.

China’s GPA accession plan has received a major boost very recently. In its formal application back in 2007, China delivered its initial offer of conditions for acceding to the GPA and has revised that offer several times since then. On 10 April 2018, President Xi Jinping announced that China would accelerate the process of its accession to the GPA. On 20 October 2019, China circulated its sixth revised market access offer which offered additional commitments going beyond its last offer made in 2014. The new offer is now under discussion in the WTO’s GPA Committee. However, since China is required to have bilateral negotiations with each GPA member (including the United States), the timing for China’s accession remains unknown at this time. The fact that the United States government is considering withdrawing from the GPA adds a further layer of uncertainty to the entire process.

Despite the potential slowdown of the GPA negotiations due to the coronavirus and the possibility of complex bilateral negotiations ahead, with the State Council’s push to improve the business environment and implement a fair competition policy in China, ongoing reform of China’s public procurement regime is still expected to deliver important business opportunities for market players in the foreseeable future.