Omnia Health is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Chinese government pledges to ensure foreign suppliers’ fair participation in medical equipment procurement

Article- Chinese government pledges to ensure foreign suppliers’ fair participation in medical equipment procurement

international-meeting-in-china.jpg
Foreign suppliers shall get equal treatment in all government bids, including medical equipment, reveals Omdia analyst Sally Ye.

In an important move for foreign companies, the Chinese government has announced that foreign suppliers shall get equal treatment in all government bids, including medical equipment.  

On October 26, 2021, the Ministry of Finance (MOF) issued an official notice titled “Circular of the Ministry of Finance on Implementing Related Policies Concerning Equal Treatment to Domestic and Foreign-invested Enterprises in Government Procurement Activities.”

According to the Notice, government bodies must not discriminate against foreign suppliers for government procurement if their products are produced in China:

“All products produced within the territory of China are entitled to having equal access to government procurement activities, regardless of their suppliers being domestic enterprises or foreign-invested enterprises.”

“To ensure fair competition between domestic and foreign-invested enterprises, no limitations shall be imposed to suppliers in terms of their ownership, organizational structure, shareholding structure, the nationality of investors, product brands and other unreasonable conditions in the process of government procurement activities.” The only exceptions are for procurements related to state security.

This is a turnaround instruction to local authorities regarding government bidding. In past years, the government procurements in China have been increasingly in favor of Chinese brands by setting conditions for bids with “made-in-China” products. Since 2017, local governments have increased the proportion of purchases of made-in-China products in their local government bids. In medical device procurements, many provinces released an imported medical device List to specify which categories of medical equipment can be imported.

This list has become shorter over the years. For example, the number of medical devices on the 2020 Import Medical Device List of Guangdong province was shortened to 46, a drastic reduction from 136 in 2019.  

The shortened list of imported medical devices reflects an increased proportion of made-in-China products in government bidding. This is particularly true in the provinces where domestic medical device manufacturers are strong, such as Guangdong, Jiangsu, and Zhejiang provinces

The made-in-China proportion requirement further increased in May 2021. A document from the central government stipulated that 137 out of 178 types of medical devices should only be procured from made-in-China products. For example, a color doppler ultrasound system is a type of medical device. In all government procurements of color doppler ultrasound systems, only products produced in China can participate in the bids. 

However, there are no official criteria for made-in-China products in any government documents. In practice, these criteria vary from province to province and can be ownership of the supplier, origin of brand, or production location of key components. The made-in-China requirement in government procurements barred foreign companies from participating in the biddings, even ones having production facilities in China. 

Therefore, the latest instruction released by the Ministry of Finance to assure foreign suppliers’ equal participation in government procurement requires a big change of practice among local governments. 

The notice is important because the value of government procurement is significant: it reached ÂĄ3.7tn ($572.5bn) in 2020, accounting for 3.6% of China’s GDP. It grew at a compound annual growth rate of 13.5 percent between 2014 and 2020. 

The timing of this instruction is consistent with a general move of the Chinese government towards greater openness to foreign companies:

  • In September 2021, China applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement that requires the members to open up their economies, including state-owned enterprises and government procurement.
  • On November 22, 2021, Premier Li Keqiang pledged greater strides in opening up the Chinese market to foreign investors during a trip to Shanghai.

China benefits enormously from global trade and receives pressure from members of the World Trade Organisation (WTO) to open its economy to foreign companies and to be more transparent in terms of the government policies related to commerce. In October 2021, during the Trade Policy Review of China, various member countries complained of unequal treatment of foreign companies.

China is the second-largest medical device market in the world; therefore, assuring equal participation in government procurement would grant significantly more business for non-Chinese medical device companies. 

Sally Ye is a health care technology analyst at the Healthcare Technology division of Omdia, a sister research brand of Omnia Health. Located in the US, Europe and China, Omdia’s health care team produces a wide range of syndicated and customised reports, including a monthly China Healthcare Market Update, the Healthcare IT Topical Report, and the Healthcare Equipment Database, as well as in-depth reports and analysis on the medical imaging industry.

Hide comments
account-default-image

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish