Beijing Orders 'buy China' Requirement For Stimulus Projects

BEIJING - 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 Washingtons Buy American stimulus provisions.

Projects must obtain official permission to use imported goods, said an order issued by Chinas 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 Beijings 4 trillion yuan (US$586 billion) stimulus. Foreign makers of wind turbines complain they have been shut out of bidding on a $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, says 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.

Beijings 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 U.S. suppliers of steel, iron and manufactured goods in projects financed by its stimulus. Chinas main state news agency labeled such conditions poison to efforts to solve the global economic crisis.

Chinas World Trade Organization 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 Beijings Buy China order.

The American and European chambers of commerce in China and spokespeople for the American Embassy and European Union mission did not immediately respond to requests for comment.

Foreign diplomats and business groups have appealed to Beijing to release more details of stimulus projects and how companies can win contracts.

Authorities are looking into complaints by Chinese companies that they were unfairly excluded from stimulus projects, the government announcement said.

Bidding documents set a lot of discriminatory conditions to illegally limit Chinese-made equipment. This phenomenon is very obvious and in some cases very severe, it said. It limits the improvement of the equipment manufacturing industry.

The order does not make clear whether domestically made goods includes products 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.

The European Chamber of Commerce in China said in May that European makers of wind power equipment, even those with Chinese factories, have been eliminahttp://www.ichatbeijing.com/beijing/357/beijing-orders-buy-china-requirement-for-stimulus-projectsted from bidding for a $5 billion stimulus-financed power project.

The criteria are done in a way that by definition will probably exclude foreigners from bidding, said the chamber president, Joerg Wuttke.