Foreigners favoured in some deals, says NDRC

PUBLISHED : Tuesday, 16 June, 2009, 12:00am
UPDATED : Tuesday, 16 June, 2009, 12:00am

Beijing has weighed into a growing dispute over the allocation of funds in its 4 trillion yuan (HK$4.53 trillion) stimulus package after European companies complained they were being discriminated against in tendering for projects.

In an attempt to hose down simmering tensions over the package, top officials claim domestic firms are the ones being discriminated against in some contracts. This counters claims from European manufacturers that they were kept out of wind turbine contracts.

It came after the National Development and Reform Commission and eight other ministries issued a joint circular early this month, stressing that government-invested infrastructure projects should favour domestic suppliers.

The NDRC explained that many tenders for equipment actually contained 'discriminatory conditions' that favoured foreign suppliers over domestic ones.

'This is a serious problem, and the relevant industry associations and companies [domestic suppliers] have shown strong disapproval,' the industry policy setter said.

It said favouring foreign suppliers was against government procurement laws, which stipulate that tenders must be conducted in a fair and transparent manner.

It added that such discrimination would hamper enhancement of the competitiveness and growth of the nation's equipment manufacturing industry.

The NDRC said government investment projects should follow regulations on government purchases, which require that unless products or services are unavailable at reasonable business terms in the domestic market, contracts should be awarded to local suppliers. Prior approval from regulators is required before they can be imported.

An official at the China Machinery Industry Association said in most cases where foreign products were chosen against domestic ones and quality and service are considered the same, higher recognition and trust in foreign brands was the key factor for the purchase decision.

An appreciating yuan and equipment import tax exemptions in industries supported by Beijing have also favoured foreign suppliers over domestic ones in some cases.

In most nations, priority is given to domestic suppliers if the terms are the same.

The NDRC's comments came after European Union Chamber of Commerce in China chairman Joerg Wuttke reportedly said Beijing had embarked on a drive to lock foreign suppliers out of at least one major wind farm project to help domestic firms absorb surplus capacity.

However, Chinese Wind Energy Association secretary-general Qin Haiyan yesterday said European contenders had not won contracts because their prices were too high.

He said the foreign firms had offered 6,000 yuan to 7,000 yuan per kilowatt of wind turbine capacity, compared with 5,000 yuan being offered by domestic companies.

'They said their products are of better quality, but they are only providing the same guarantee of two years,' he said. 'What has happened is that the foreign suppliers have been losing market share to domestic ones in the past two years as the latter's capabilities caught up rapidly.'

Foreign suppliers and their mainland joint ventures saw their market share drop to 24.4 per cent last year while that of domestic suppliers jumped to 75.6 per cent from 44.9 per cent, the association's figures show.