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China: New Procurement Rules for Innovative Products

(Jan. 12, 2010) On October 30, 2009, the Ministry of Science and Technology (MOST), the Ministry of Finance (MOF), and the National Development and Reform Commission (NDRC) of the People's Republic of China (PRC) issued a joint circular, with detailed procedures appended, that affects government procurement of certain high technology products. However, the notice reportedly was not posted until November 15, leaving less than a month for would-be applicants to meet the December 10, 2009, deadline for submission of their accreditation applications. (Letter from industry and company associations world-wide to the Ministers of MOST, MOF, & NDRC, Dec. 10, 2009, hyperlinked in Loretta Chao, China's Curbs on Tech Purchases Draw Ire, THE WALL STREET JOURNAL, Dec. 11, 2009, available at

In a letter dated December 10, 2009, more than 30 industrial and business associations in the United States, Europe, Japan, and South Korea sent a letter to the heads of the MOST, NDRC, and MOF “strongly [urging] the Chinese government not to proceed” with the new procedures and intimating that the new policies were discriminatory towards multinational companies. (Id.) Foreign businesses' dissatisfaction with PRC government guidelines on “indigenous innovation” is longstanding, the press has pointed out, “[b]ut the older, vague requirements appeared to gain teeth with the move to create a national catalog of products that would receive preferential treatment for procurement.” (Id.)

The new procedures require vendors of high technology to obtain accreditation for their products before they may be included in a planned “Government Procurement Indigenous [also translated as “Independent”] Innovation Product Catalog” (Zhengfu caigou zizhu chuangxin chanpin mulu) (Procurement Catalog). (Circular of the MOST, NDRC, and MOF on Launching 2009 National Independent Innovation Product Accreditation Work [with detailed instructions attached], MOST Issuance No. [2009] 618 [in Chinese], Oct. 30, 2009, MOST website, available at
.) Vendors of products listed in the Procurement Catalog may enjoy preferential treatment in government purchasing activities, even though vendors whose products are not listed “will theoretically be allowed to sell products to government agencies.” (Chao, supra.)

The Procurement Catalog will be determined, and actively managed, by the Ministry of Finance, in consultation with relevant agencies, on the basis of the National Independent Innovation Product Catalog [Guojia zizhu chuangxin chanpin mulu] [National Product Catalog] and in accordance with government procurement policy requirements and actual circumstances. Six categories of products will be eligible for accreditation and inclusion in the Procurement Catalog: computers and application devices, communications products, modernized office equipment, software, new energy sources and equipment, and highly efficient energy-conservation products. (Ministry of Science and Technology, National Science and Technology Assessment Center, National Indigenous Innovation Product Reporting Instructions (Year 2009) [in Chinese] (Sept. 2009), at 4-5, available at uage: ZH-CN; mso-bidi-font-weight: bold”>
; U.S. Information Technology Office, Instructions for National Indigenous Innovation Product Application Procedures(2009)[Draft translation], American Chamber of Commerce in the PRC website, (last visited Jan. 5, 2010) [click on third attachment].) The list is likely to be expanded, some sources maintain. (Chao, supra.)

Innovation product catalogs in and of themselves are not new; several have been released at the provincial and municipal-government level since the introduction in 2006 of the central government's indigenous innovation policy. That policy is set forth in the Medium- and Long- Term National Plan for the Development of Science and Technology 2006-2020. (Issue Brief: New Developments in China's Domestic Innovation and Procurement Policies, US-China Business Council website, Dec. 15, 2009, available at

The compilation of the National Product Catalog is based on the 2006 Measures for the Administration of the Accreditation of National Indigenous Innovation Products (for Trial Implementation). The Measures provide that the catalog is to be issued by MOST, in consultation with the MOF and the NDRC and published on MOST's official website and in the SCIENCE AND TECHNOLOGY DAILY [KEJI RIBAO]. The catalog is to include, among other data, the names and model numbers of the products, their principal functions, and the name of the vendor (arts 1& 9). The Measures state, moreover, that “[a]ccredited national indigenous innovation products will enjoy priority of purchase in government procurement, in procurement for national important projects, and in procurement using other public finance funds.” (Art. 2, in part adapted from English translation of the Measures (promulgated and effective on Dec. 31, 2006), Chinalawinfo online subscription database, (last visited Jan. 5, 2010).)

Certain enterprising individuals have been quick to try to turn the new measures to their monetary advantage. A December 29, 2009, announcement by MOST cautioned that some enterprises had reported having received a “Uniform Information Issue Registration Form for Nationwide Reporting of Indigenous Innovation Product Items,” sent out by the “China High Technology Enterprise” periodical publisher, for which a charge of 4,000 yuan (about US$586) would be collected. The MOST announcement emphatically declared that 2009 National Indigenous Innovation Product Accreditation and that publisher have no cooperative relationship whatsoever, and that the consequences of indigenous innovation product accreditation work carried out between any enterprise and the publisher would have nothing to do with the MOST, NDRC, and MOF. (MOST Center for Science and Technology Assessment, Important Announcement Concerning Indigenous Innovation Product Accreditation Work [in Chinese], MOST website, Dec. 29, 2009, available at [under tongzhi tonggao section].)