On September 30, 2025, the General Office of the State Council of China issued the Notice on Implementing Domestic Product Standards and Relevant Policies in Government Procurement (hereinafter referred to as “the Notice”). It provides favored policies for local products under certain categories in the government procurement catalogue. The legal basis of the Notice includes but not limited to the Government Procurement Law of China and Foreign Investment Law of China. The measures stated in the Notice shall come into force on January 1, 2026.

The government procurement system in China has been supported with a significant document, the Classified Catalogue of Government Procurement Items, the latest version of which was issued in 2022. It contains three general categories (category A goods, category B project, and category C services), with 43 subcategories. Theterm “domestic product” ONLY apply to most of the products covered in Category A (goods), which mostly include office appliance, information and communication equipment, vehicles and automotives, machinery, electrical equipment etc.

Detailed definition of “domestic product” is provided as:

a.      Products that are manufactured within the territory of China, that is, within the customs territory of the country, to undergo the property alteration in which raw materials and components turn to finished products. “Property alteration” refers to the production of a completely new product that is different from the raw materials or components through manufacturing, processing or assembly, and has a new name and characteristics (uses).

b.      The proportion of the cost of components produced within the territory of China in the product should reach a prescribed ratio [calculated by basic formula: (Cost of component that are manufactured in China)/(Total product cost)≥prescribed ratio], which will be set up by the Ministry of Finance (MOF) with other regulators, and the ratios of different product types shall vary from each other. Before the ratios are announced for the relevant product types, mainly requirements listed in items a shall apply.

c.       For certain products, the requirements for being “domestic product” will extend to additional qualification, such as the production and completion of key components and key processes within the territory of China. MOF will take the lead and join with other relevant authorities to establish further rules on what categories shall comply with such additional requirements and what the specific requirements shall be in the future.   

The Notice directly puts forward following favored policy for domestic products in government procurement:

-  For procurement that involved the competition of domestic and non-domestic products, a 20% price reduction shall be given to domestic products, and the reduced price shall be used in the review and scoring of a procurement bidding.

-  When a procurement project or procurement package contains multiple products and the total cost of the products provided by the supplier that meet the domestic product standards accounts for more than 80% of the total cost of all the products provided by the supplier, the supplier shall be granted with the price reduction listed in the first item for all the products it provides.

To avoid confusion, the Notice poses three requirements for the implementation of the favored policies:

-  Annex with explanation on how to define “components that are manufactured in China” are attached with the Notice.

-  It is clarified that other than a declaration letter (template provided in the attachment of the Notice) and documentation requirements stipulated by national authorities such as MOF etc., no other additional documents are required by any procurement units or agents of the procurement.

-  Fair treatment shall be given the products that meet the definition, regardless of the attributes of manufacturers, meaning that equal treatment must be given to foreign invested, private-owned enterprises and state-owned companies.    

Foreign stakeholders are advised to notice that, the “domestic product” favored policy may initiate some direct impacts for manufacturers that mainly export product to China in the government procurement. What also may raise concerns is that quite a few implementation details, including the prescribed ratio etc., are still unclear, although it is planned to be established announced within 5 years, but in the transition period it may still be quite difficulty for stakeholders to fully ensure full knowledge on what to do and how to act in actual practice and projects. 

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