China is quietly setting new ‘buy Chinese’ targets for state-owned companies – US sources
China is quietly setting new ‘buy Chinese’ targets for state-owned companies – US sources

China is quietly setting new ‘buy Chinese’ targets for state-owned companies – US sources

WASHINGTON, Aug. 2 (Reuters) – The Chinese government quietly issued new procurement guidelines in May requiring up to 100% local content on hundreds of items, including X-ray machines and magnetic resonance imaging equipment, building new barriers for foreign suppliers, three US- It told based sources to Reuters.

Document 551 was issued on May 14 by the Chinese Ministry of Finance and the Ministry of Industry and Information Technology (MIIT), entitled “Audit Guidelines for Government Procurement of Imported Products,” said a former U.S. official who received a copy of the previously unreported 70- pages catalog and read parts to Reuters, but requested anonymity.

The former official said that when China joined the World Trade Organization, it agreed not to issue such internal documents. The document also violated the spirit of the January 2020 phase 1 trade agreement with the United States, the former official said. “They need to reduce barriers, not create new ones.”

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Sent to Chinese hospitals, companies and other state-owned buyers, the document sets local content requirements of 25% to 100% for 315 items. They include medical equipment, ground-based radar equipment, testing machinery, optical instruments; objects used for animal husbandry; seismic instruments and marine, geological and geophysical equipment, the former official said.

The document has not been published by Beijing.

China’s Ministry of Finance and Ministry of Industry and Information Technology did not respond to inquiries about it.

Some U.S. lawmakers and industry officials are increasingly concerned about Beijing’s transparency in trade matters.

The new guidelines affect a wide range of goods, including medical devices, which Beijing agreed to buy more of under the terms of the Phase 1 trade agreement. For example, magnetic resonance imaging equipment – a major export for US companies in the past – would face a 100% local content requirement under the new guidelines, the former official said.

U.S. trade experts said China’s local content rules differed from planned increases in U.S. “Buy U.S.” thresholds because they were not disclosed, affecting far greater amounts of medical equipment and other goods, as China’s state-owned enterprises include hospitals and other devices.

BILLIONS IN SALES AT SPID

China imported about $ 124 billion in goods from the United States by 2020, a large portion of which was purchased by large state-owned and government-affiliated companies that control the education, health, transportation, agriculture and energy sectors.

Exports of U.S. medical devices, made by companies including Johnson & Johnson, GE and Abbott, amounted to $ 47.5 billion in 2018, with exports to China worth $ 4.5 billion according to data from Fitch Solutions . Chinese imports of such goods declined during the trade war between the United States and China in 2018 and 2019, but increased again after the Phase 1 trade agreement was concluded.

Doug Barry, a spokesman for the US China Business Council, said his group had heard about the document but had not seen a copy. Group members operating in China report new problems competing for and winning bids there, including areas such as test equipment and transportation, he said.

The Council urges the administration of President Joe Biden to conclude its review of US-China trade policy and raise its concerns when Biden and Chinese President Xi Jinping meet in October.

Biden’s predecessor Donald Trump, as part of his sometimes controversial China trade policy, was a strong supporter of “Buy American” and “America First.”

Biden signed a “Buy US” executive order during his first week in office in January with the aim of harnessing the federal government’s enormous purchasing power to boost US production, and last week he unveiled new rules on US content levels in goods purchased by the government.

The Office of the US Trade Representative, which reviews trade policy between the United States and China, declined to comment on the Chinese document or whether it violates the US-China trade agreement.

USTR spokesman Adam Hodge also declined to provide any timetable for when USTR will complete its review.

A congressman who was briefed on the document by people who have seen it said it raised many questions, including whether foreign-owned entities producing goods in China for the Chinese market would meet the new local content criteria.

The non-public nature of the guidelines also meant the Chinese government could downplay their significance, staff said. “It is not published; it is not public. It is being circulated through companies and associations and other groups,” staff said. “By not releasing it publicly, China could deny it and say it is only guidance.”

New import restrictions could also make it difficult for China to make up for lost ground by fulfilling its commitment to buy an additional $ 200 billion in US goods and services under the US-China trade agreement compared to 2017 levels.

With three-quarters of the agreement now concluded, China is in the process of buying just over 60% of the goods needed to achieve its goal, according to Chad Bown, a fellow at the Peterson Institute for International Economics.

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Reporting by Andrea Shalal; further reporting by Tony Munroe in Beijing; editing by Heather Timmons and Grant McCool

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