First International Procurement Case in China

The findings of the investigation concluded that China unfairly treated EU medical devices and suppliers in its public procurement.

. The Commission can impose measures to restrict access to companies from non-EU countries in EU public tenders if it finds problems in non-EU country procurement. The Commission can impose restrictions on companies from non-EU countries if it finds that there are problems with non-EU country public procurement. The ‘Made in China 2025 Strategy’ and the Made in China 2025 Technology Roadmap for Key Years’ specify increasing targets for the proportion of domestically produced high end medical devices procured in hospitals. The objective of replacing imported medical devices with domestic production is embedded in the ’14th Five-year Plan for the Medical Equipment Industry Development’ and other policy and legal documents.The Commission considered that Article 10 of the Government Procurement Law, as the core of the ‘Buy China’ policy, “creates a legally binding obligation for contracting entities to procure domestic medical devices instead of imported ones whenever both types of medical devices are in competition and the domestic medical devices constitute a reasonable alternative”. The Commission believes that volume-based centralised procurement for medical devices is a method of forcing bidders to provide the lowest price possible, since contracting authorities have set a maximum reference and maximum price margins. The mechanism, which relies solely on the price of bids, “leads suppliers into offering extremely low bids in order to meet the selection criteria”, and is “not sustainable on the long-term for profit-oriented businesses that cannot rely upon State support”. The Chinese government did accept the existing measures and practices, and the preference for PRC-made medical devices in public procurement. The Chinese government however noted that it had not undertaken any international commitments on public procurement, which meant that its measures and practices were legitimate.[1]Interestingly, the Chinese government suggested two broader solutions: a future accession by China to the WTO Government Procurement Agreement, with accompanying market opening or a bilateral agreement on procurement between the EU and China. It seems highly unlikely that either could be implemented within the timeframes of the present IPI investigation.[2]

What comes next? The IPI measures could be either a score adjustment for tenders submitted to the EU by Chinese economic operators, or an exclusion from public tenders of Chinese economic operators. Once imposed, IPI measures may remain in force for five years, with a possibility of a five-year extension (Article 6 of the IPI Regulation).

The Commission will have to consider whether it is in the EU interest to adopt any measures. Its proposal will be subject to an examination procedure. The Member States can vote on it, but a qualified majority is required to block the proposal. This post will not cover the interesting topic of how this investigation fits in with the broader geopolitical discussions between China and EU.

Report from the Commission pursuant to Article 5(4) of Regulation (EU) 2022/1031 on the investigation under the International Procurement Instrument concerning measures and practices of the People’s Republic of China in the public procurement market for medical devices (“

Report

“), and accompanying Staff Working Document, Factual findings of the IPI investigation on the procurement market for medical devices in the People’s Republic of China (“

SWD

“), available here

.

SWD, paras. 75-76.

Story originally seen here