Economy

Commerce minister moves to quell concerns over favoritism

By Xiao Wang (China Daily)
Updated: 2010-08-18 10:03

A local government procurement center in Hubei province. [Photo / Asianewsphoto]

Despite concerns about local bias in government procurement, innovation by foreign-invested companies enjoy equal policy support if at least 50 percent of a product's added industrial value comes from operations in China, said Chen Deming, minister of commerce.

Chen made the remarks during a meeting in Beijing last Saturday with Doris Leuthard, president of the Swiss Confederation and minister of Swiss Economic Affairs, according to the ministry's official website.

In November, China's Ministry of Science and Technology, National Development and Reform Commission and Ministry of Finance jointly announced that China-made innovation would be given priority in government procurement.

The policy stirred unease among foreign investors concerned they could be blocked out of China's vast government purchases.

The favorable policy for homegrown proprietary innovation is a looming threat, said 19 US trade associations in a joint letter to high-ranking US government officials including Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner.

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Yet such practices are common in many countries and not against World Trade Organization (WTO) rules, Albert Keidel, a senior fellow at the Atlantic Council, told the radio network Voice of America.

Keidel, an independent researcher with over 25 years of experience analyzing China's economy, currently teaches a graduate course on the subject at Georgetown University.

Yu An, a professor of Tsinghua University, cited the Buy American Act in the United States as an example to show even signatories to the Government Procurement Agreement (GPA) such as the US and EU have restrictions on government procurement, Chinanews. com reports.

The GPA is the only legally binding agreement in the WTO covering government procurement.

Since China has not signed the agreement, the Chinese government is entitled to formulate favorable policies for government procurement, Keidel said.

But such favoritism would probably result in mounting pressure from the US and European nations for China to sign the GPA, he noted.

When it joined the WTO in 2001, China pledged that it would also join the GPA "as soon as possible".

Minister Chen said the Chinese government is "serious and positive" about joining the GPA, but the accession negotiations do not depends entirely on China, but also other GPA members, he noted.

China submitted a revised bid to the WTO Secretariat in July that contains some "marked improvements", Financial Times quoted Deputy US Trade Representative Demetrios Marantis as saying. Yet China's latest proposal stands little chance of being accepted, according to a source briefed on the negotiations, the Financial Times reports.

Chen said he hopes that parties involved in the negotiations will take a flexible and pragmatic attitude to achieve satisfactory and balanced results.