Balance tilts in favor of local firms

When the going gets tough, the tough, sometimes, complain - it's about where the precious money goes, and who gets the few life-saving deals.

And sometimes, their complaints are heard and acted upon.

For the first time since the launch of the nation's 4-trillion-yuan economic stimulus¹ package late last year, the government has responded favorably to rising protests about too many fat contracts being awarded to foreign companies.

On June 1, the National Development and Reform Commission (NDRC), the top economic planner, warned in a statement that Chinese products have suffered "illegal barriers" when bidding for government purchases paid for from the stimulus budget.

It said the "discrimination" is particularly serious in industries including equipment manufacturing, which has "aroused wide concerns from industry associations and companies".

On June 4, the NDRC and eight other ministries² jointly³ released a notice requiring local governments to give priority to Chinese products when purchasing for government-invested projects.

Lu Renqi, vice-president of the China Machinery⁴ Industry Federation⁵, said many local governments favor imported products because of strong financial incentives⁶.

Many machinery items fall under the Customs' "encouraged" category for import, and thus enjoy preferential tariffs⁷. The appreciation⁸ of the yuan has played a part in the reluctance⁹ to buy local.

There are no figures on the proportion, or the value, of foreign products purchased under the stimulus budget.

But some major projects have been won by foreign companies, such as German industrial conglomerate¹⁰ Siemens AG's winning of a 750-million-euro ($1 billion) order for Beijing-Shanghai high-speed rail trains.

"The mentality¹¹ that foreign brands are better than Chinese ones has misled us for years," said Jing Yunchuan, chief lawyer of Beijing-based Gaotong Law Firm, criticizing Chinese companies which prefer foreign products.

After three decades of progress, many Chinese brands have built up core competitiveness, but some purchasers do not seem to be aware, said Jing.

But even as local firms seem to be receiving some redress¹², foreign companies are complaining that they are the victims of unfair bidding practices.

Joerg Wuttke, president of the European Chamber¹³, was quoted as saying by China Economic Weekly that "the Chinese government seems to have readily wiped foreign providers out of the country's 4-trillion-yuan stimulus package".

Last month, all foreign companies had lost in the first round for a 5-billion-euro project for 25 sets of wind turbine generators¹⁴, including the world's leading producers GE International Inc and Vestas Wind Systems A/S.

"In the stimulus package, there is no clause or rule to limit foreign suppliers. Chinese and foreign companies have an equal right to compete," said Ma Haitao, a professor at the Central University of Finance and Economics.

Questions:

1. On which day did the National Development and Reform Commission (NDRC) released a notice requiring local governments to give priority to Chinese products when purchasing for government-invested projects?

2. Which firm won the 750-million-euro ($1 billion) order for Beijing-Shanghai high-speed rail trains?

3. What was the president of the European Chamber complaining about recently?

Answers:

1. June 4.

2. German industrial conglomerate Siemens AG's.

3. That foreign companies had lost in the first round bid for a 5-billion-euro project for 25 sets of wind turbine generators.