Notice on indigenous innovation indicates relaxation of government procurement policy


A draft notice published on 10 April has been welcomed by the international business community in China as a step towards reducing official discrimination against foreign companies bidding for government contracts.

The draft Notice on Developing the Work of Accreditation of National Indigenous Innovation Products in 2010 is open for public consultation until 5 May. It sets out draft rules for the establishment of an accreditation system for the purchase of high-technology goods by government agencies. Under the system, any manufacturing enterprise in China which has PRC legal person status may apply for the accreditation of its products as indigenous innovative products.

The draft notice was jointly issued by the Ministry of Science and Technology, the Ministry of Finance and the National Development and Reform Commission. It comes in the wake of earlier rules issued by the same three bodies in December last year, which caused controversy by appearing to give preferential treatment to products containing domestic Chinese intellectual property.

In response to the December draft, industry groups representing many of the world’s major technology companies wrote a letter to the government claiming that the requirements of the original rules would discriminate against them.

By extending the accreditation system to all enterprises with PRC legal status, the new rules cover products made in China by foreign manufacturers with equity joint ventures and wholly foreign-owned enterprises, as well as products made by domestic companies.

The notice sets out six criteria that must be met for a product to gain accreditation. These are summarized as follows:

  1. The product must conform with national laws and regulations, and industrial and technology policies.
  2. Applicants must undisputedly enjoy the legal right to, or the licence to use, the intellectual property in China relating to the product that has been developed, either through technological innovation or transfer.
  3. Applicants must possess the registered trademark or usage rights to the product in China.
  4. The product must be technologically advanced.
  5. The product must be of reliable quality.
  6. The product must already be on sale, or possess economic benefit and good market prospects.

Joerg Wuttke, president of the European Union Chamber of Commerce in China, was said to be “pleased” that assurances received by the Chamber before the new draft was issued, that foreign enterprises would receive fair treatment in rules that aimed to promote innovation, had been adopted in the draft.

It is also likely that the changes in the draft notice were made with an eye on current World Trade Organization (WTO) negotiations that are taking place on the subject of government procurement.

As reported in the December 2009-January 2010 issue of China Business Law Journal, following a Sino-US meeting on trade issues in Hangzhou in late October last year, China agreed to submit an offer to join the WTO’s Agreement on Government Procurement (GPA) by 2010. According to the WTO’s website, China is one of eight WTO members that are currently in the process of acceding to the GPA.

The GPA is a “plurilateral” agreement under the WTO Agreement, meaning that not all WTO members are bound by it. It includes provisions relating to national treatment of, and non-discrimination against, suppliers from countries which are party to it with respect to the procurement of goods, services and construction services.

The GPA also covers transparency and procedural aspects of the procurement process, attempting to ensure that governments do not discriminate against goods, services or suppliers from other participating countries in their procurement processes. subscripton ad blue 2022