A high-profile forum draws domestic and global automakers HIGH-PROFILE MEETING: The 2005 Chinese Government Auto Purchase Forum is hailed for bridging automakers and some powerful buyers
As the 2006 Chinese Government Auto Purchase Forum, scheduled on July 11-13 in Tianjin, draws near, the country said it will launch negotiations to join the Government Procurement Agreement before December 2007, and it will also submit its government procurement market-opening list to the World Trade Organization.
What will it mean once China opens its government procurement market to the domestic and global economy? What is the current status of the government auto purchase market, an important part of government procurement in China? Are there any problems and how will it fare in the future? Chen Dajun, Secretary General of the Organizing Committee of the Chinese Government Auto Purchase Forum, recently spoke to Beijing Review staff reporter Dai Xiaohua about these issues.
Chen first noted that the Chinese Government has strongly advocated independent innovation and encouraged the development and protection of intellectual property rights and national industrial brands. This is especially important to China’s auto industry, which is lagging behind global competitors in terms of research and development and self-owned brands.
The forum organizing committee is paying close attention to the problem and aims to build a high-profile platform for communication between suppliers and buyers in the government procurement market through the forum this year. Chen said he hopes the forum can promote the healthy development of China’s government procurement system and domestic auto industry through such activities as group discussions, face-to-face talks and on-the-spot agreements.
This year, major domestic automakers are enthusiastic about joining the forum and have brought their latest auto models with self-owned brands to the forum. These include Hongqi made by the China FAW Group Corp., Rover of the Shanghai Automotive Industry Corp., off-road vehicles of Shaanxi Automobile Group Co., as well as Chery and Geely, the national brands well known to the domestic market. Some of the vehicles had just rolled off the assembly line.
To support national auto brands, the Central Government has offered more preferential purchasing policies. After the forum was held last year, for example, Chery, the representative national auto brand, was put on the government procurement list. Local governments also paid more attention to national auto brands. More preferential policies and large purchasing quotas have made government procurement a strong force to back up the development of a national auto industry.
Keeping commitments
TEAM HEAD: Chen Dajun, Secretary General of the Organizing Committee of the 2006 Chinese Government Auto Purchase Forum
However, Chen also noted that China’s support for national auto brands does not mean it will discriminate against foreign products. China will keep to its commitments and try its best to conduct government procurement on the principle of national treatment and non-discrimination, as it has promised to open its government procurement market and to join the Government Procurement Agreement as soon as possible.
In recent years, the Chinese Government has adopted a series of measures to ensure fairness and transparency in government procurement. In 2003, China released the Government Procurement Law, promulgating that public bidding is the main method for government purchases. It’s rare to see a state ensuring transparency in government procurement through legal regulations, even for a developed country.
According to the law, goods or services projects worth over 1.2 million yuan and engineering projects worth over 2 million yuan for central and government agencies must involve public bidding, and auto purchases are no exception.
This procurement method has drawn not only many domestic automakers, but also quite a few global auto giants, to the auto procurement forum in the last two years. This year, Mercedes Benz, BMW, Ford and Volkswagen will bring new models to the forum, aiming to increase their market shares in government procurement.
In addition, the Chinese Government is releasing purchasing information to the media to improve transparency in government procurement. In 2003 alone, purchasing information released through designated media doubled that of 2002.
Strengthening supervision
Chen said that while China’s government procurement doesn’t have a long history, it has made rapid progress. From 1998 to 2003, government procurement increased from 3.1 billion yuan to 165.9 billion yuan, with an average annual growth rate of 138 percent. The number jumped further to 200 billion yuan in 2004 and 250 billion yuan in 2005. This year it is estimated to grow to 300 billion yuan. Auto purchases account for 25 percent of the total procurement volume, with the figure reaching 60 billion yuan in 2005 and 70 billion yuan this year.
But corruption emerged along with the rapid market expansion. Some government officials in charge of procurement become key figures in bribery. Chen said many officials involved in bribery cases have been punished according to the law.
The Chinese Government has also paid attention to corruption in government procurement. In addition to legal action, the Chinese Communist Party’s departments for discipline inspection and related government agencies have reinforced their supervision. It is reported that supervision of government procurement has topped the key work lists of the Central Commission for Discipline Inspection of the Communist Party and Ministry of Supervision.
Meanwhile, local governments have arranged two departments--purchasing offices and centers--to complete the task. The former works out purchasing plans and the latter sees to implement them. The governments hope the two departments can check and monitor each other so as to prevent corruption.
Chen said the high-profile forum this year will discuss more practical problems, release more authoritative and detailed information, and sign more purchasing proposals. All these will point to a rapid and healthy development of the government procurement market, including auto purchases.