China to submit new procurement proposal to WTO

GENEVA (Reuters) - China will submit a new proposal by mid-July to the World Trade Organization to join the WTO government procurement agreement, which regulates trade in public-sector purchases, trade officials said on Wednesday.

Chinese membership in the voluntary agreement is keenly awaited by Beijing’s partners, who say the scale of government purchases in China’s economy is potentially huge.

Yi Xiaozhun, vice-minister of commerce, told WTO members that China would make the offer before the next meeting of the global trade body’s government procurement committee, due in the middle of next month, the officials said.

He was speaking during the WTO review of China’s trade policies, held every two years, at which China faced demands for more transparency in its trade policy and calls to continue liberalizing its economy -- to which Yi responded by assuring members that China would continue opening up.

Some members including the United States had questioned China’s “indigenous innovation” policy which they said amounted to a form of “Buy China” favoring domestic producers over foreign suppliers, but Yi said it applied to all companies established in China.

China first applied to join the WTO government procurement agreement in December 2007 but its partners wanted better terms than it first offered.

Worldwide, government procurement accounts for about 23 percent of demand -- nearly a quarter of the economy.

China estimates that the share of government procurement in its economy which would be covered by the agreement is much less.

Yi said it accounts for only two percent of gross domestic product because China excludes purchases by state-owned enterprises and limits the definition to purchases using budgetary funds above a certain threshold.

That would still make it worth some 615 billion yuan ($90 billion) a year.

So far 41 of the WTO’s 153 members have joined the government procurement agreement, including the EU’s 27 members. The latest to join was Taiwan in 2009.

All WTO members undergo a trade policy review every two or four years, with bigger economies assessed more often.

China received a record 1,500 requests for information ahead of the review, testifying to the interest in the rapidly growing economy of the world’s second biggest exporter and third biggest importer.

During the review it faced calls to open up services such as banking, insurance, telecoms and postal services, and criticism, particularly from the United States and European Union, about restrictions on exports of raw materials.

In a report for the review, the WTO said the export curbs may not meet their aim of conserving resources but gave Chinese manufacturers an unfair advantage.

But developing countries, especially in Asia, and some rich nations like New Zealand and Japan, expressed support for the way China had kept its economy open during the crisis.

Reporting by Jonathan Lynn; editing by Andrew Roche