December 5, 2024 – The Ministry of Finance has released the Notice on Issues Related to Standards and Implementation Policies for Domestic Products in the Field of Government Procurement (Draft for Comments), seeking public feedback by January 4, 2025.
The draft policy focuses on industrial products listed in the Government Procurement Item Classification Directory. A key proposal is to grant domestic products a 20% price advantage during bidding evaluations. Specifically, a 20% price deduction will be applied to the quoted prices of domestic products, with the adjusted price used for evaluation, effectively favoring domestic products in competitive government procurement activities.
Redefined Criteria for Domestic Products
The draft introduces stricter criteria for what qualifies as a domestic product. Previously, any product manufactured within China was considered domestic for government procurement purposes. Under the new rules, only products manufactured in China and containing a specified proportion of domestically produced components will qualify.
The proportion of domestic components required will be determined by the Ministry of Finance in collaboration with other departments, tailored to the needs of industrial development and product categories. For certain products, additional criteria may be imposed, such as requiring key components to be manufactured in China or critical production processes to be completed domestically.
Rules for Cost Calculation
To ensure transparency, the draft includes the Rules for Calculating the Cost of Domestically Produced Components in China. These rules classify components into two tiers:
Primary components: Directly form the product.
Secondary components: Constitute the primary components.
If a primary component cannot be further subdivided, it is treated as a secondary component. The total cost of secondary components produced in China will count as part of the domestic cost, while those not produced in China will be excluded from the calculation.
Implications for Overseas Enterprises
This policy could significantly impact the participation of foreign products in government procurement. Enterprises are encouraged to provide feedback, particularly regarding:
The cost ratio of domestic components.
The classification of primary and secondary components for specific products.
Overseas enterprises are advised to monitor updates from the Ministry of Finance and prepare for potential changes in procurement strategies. Staying informed and engaging in the feedback process could help mitigate the risks associated with these new requirements.
For further details, the full text of the draft policy is available on the Ministry of Finance's official website.