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ABSTRACT. Since the mid 1990s, the Government of China has been developing the regulations, laws, and implementing procedures necessary to bring public procurement under a comprehensive administrative and legal framework. This paper traces the history of its development and explains the motivations: improved quality of public projects, increased transparency, development of national standards, and the relationship with trade. It describes the unique aspects and challenges of China's procurement system, notably the existence of two laws (the Tendering and Bidding Law and the Government Procurement Law), the influences of social and economic policy, and the use of procurement agents. The paper concludes with an assessment of future needs to consolidate the various procurement-related laws, develop implementing regulations, disseminate information, and strengthen the oversight function.
INTRODUCTION
Worldwide, governments spend about 10% of GDP on the procurement of goods, works and services annually. This presents an enormous market to contactors, suppliers of equipment and materials, and service providers. Although accurate statistics for China are difficult to obtain, best estimates, summarized in Table 1, indicate that "government procurement" for 2002 will reach RMB100.0 billion (about US$13 billion), an increase of about 50% over 2001.
In China, "government procurement" (zhengfu caigou) refers only to procurement by state agencies (Guojia jiguan) as well as "institutions" (tuanti zuzhi) and "social organizations" (shiye danwei). Other elements of what may otherwise be described as "public procurement," such as the tremendous volume of procurement by state-owned enterprises, for example, are not currently considered to fall within the definition of "government procurement." In this paper, the terms "government procurement" and "public procurement" are used to reflect the narrow and broad definitions, respectively.
As more and more procurement is brought within the scope of "government procurement," the amount is expected to stabilize at around RMB 400 billion (about USD 50 billion) and thereafter growth will follow that of the general economy. Other factors contributing to the substantial year-on-year increases in the value of government procurement include:
* Gradual implementation of the government procurement rules-what started as essentially pilot projects in the mid-1990s is now a nationwide, albeit developing, system;
* Reduced use of "extra-budgetary funds" (such as collected fees) for procurement in favor of the more accepted practice of budgeted expenditures; and
* Greater availability of...