China tech purchasing rule angers foreign firms

[December 11, 2009]  BEIJING (AP) -- Foreign companies are criticizing a new Chinese regulation they fear could block them from the multibillion dollar business of selling high-tech products to government departments.

The rule, in place for about six weeks but not widely known, requires sellers of high-tech products to have them accredited based on "indigenous innovation" -- local intellectual property -- before they can be listed in a government procurement catalog. Approved products will get preference over those without accreditation.

More than 30 business groups from the United States, Europe, Japan and South Korea lodged a protest in a joint letter dated Thursday and released Friday to three government ministries "to strongly urge the Chinese government not to proceed" with the new rule. The letter suggested that the new policies discriminated against multinational companies and ultimately would hurt Chinese government agencies.

The move would "reduce competition and limit the ability of Chinese government agencies to make purchases solely on the basis of quality and price," the American Chamber of Commerce in China said in a statement Friday.

The issue comes at a time of growing concerns about protectionism amid continued economic uncertainty. Chinese officials have been among the most vocal in complaining about alleged protectionist measures against their country by other nations, including the U.S.

The six categories requiring accreditation are computers and appliances, telecom products, modern office equipment, software, renewable energy and equipment, and energy-saving products.

The notice, jointly issued by the Ministry of Science and Technology, Ministry of Finance, and the National Development and Reform Commission, said the accreditation process would help develop an "innovative" country.

Phone calls to Ministry of Finance and NDRC, China's top economic planning body, rang unanswered Friday.

AmCham-China would not give an estimate on the amount of money involved, but the Finance Ministry announced in August that government purchasing, including non-technical goods, in 2008 rose 28.5 percent year-on-year to 599.1 billion yuan ($81.9 billion).

"In the current world of global integration, this unduly restricts market access, not only for foreign companies, but also for many of their Chinese counterparts," AmCham-China President Michael Barbalas said in the statement.

Barbalas called on China to sign the World Trade Organization's Agreement on Government Procurement, which would commit Beijing to not discriminate against foreign suppliers

[Associated Press]

Associated Press researcher Bonnie Cao contributed to this report.

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