China has imposed a requirement for its stimulus projects to use domestically made goods — a move that could strain ties with trading partners after Beijing criticized Washington’s “Buy American” stimulus provisions.
Projects must obtain official permission to use imported goods, said an order issued by China’s main planning agency and eight other government bodies.
Even before the order, business groups worried that foreign companies might be excluded from construction and other projects financed by Beijing’s 4 trillion yuan (US$586 billion) stimulus.
Foreign makers of wind turbines complain they have been shut out of bidding on a US$5 billion stimulus-financed power project.
“Government investment projects should buy domestically made products unless products or services cannot be obtained in reasonable commercial conditions in China,” said the order, dated June 1 and reported this week by state media. “Projects that really need to buy imports should be approved by the relevant government departments before purchasing activity starts.”
Beijing’s stimulus is aimed at insulating China from the global slump by boosting domestic demand through higher spending on construction of highways and other public works.
The communist government promised in February to treat foreign and domestic goods equally in stimulus spending and has appealed to other governments to support free trade and avoid protectionism.
China criticized Washington for a provision that would favor US suppliers of steel, iron and manufactured goods in projects financed by its stimulus. China’s main state news agency labeled such conditions “poison” to efforts to solve the global economic crisis.
There was no indication the latest order was a response to Washington’s stimulus provisions.
China’s WTO commitments require it to treat foreign and domestic goods equally in commercial trade. But Beijing has not signed a WTO treaty that extends such requirements to government procurement, which might limit options for challenging Beijing’s “Buy China” order.
Beijing has imposed similar requirements on government projects such as China’s giant Three Gorges Dam to favor domestic suppliers of equipment and services.
The European Chamber of Commerce in China, in a written statement, expressed concern that such preferential treatment for domestic companies “would send the wrong signal” at a time when international cooperation is needed to revive the global economy.
The US embassy in Beijing, in a written response to questions, said that Chinese government agencies were already required by law to buy domestically made goods and services whenever possible. The embassy did not immediately answer a question about whether Washington might challenge the order.
The order does not make clear whether domestically made products includes those of China-based operations of foreign companies.
Spokespeople for the planning agency and the Commerce Ministry did not immediately respond to requests for more details.