China offers SMEs, green sector boost with 3-year action plan to lift government purchases

China plans to boost government purchases from small and medium-sized enterprises (SMEs) and green sectors, while also leveraging digital technology to standardise procurement and curb local protectionism, in a bid to elevate private sector’s confidence, according to a three-year action plan issued by China’s cabinet.

The State Council on Thursday called for the various levels of governments to increase the share of purchases from SMEs for projects with a budget exceeding 4 million yuan (US$550,000).

The share for SMEs within a budget would be increased from 30 to 40 per cent, which would be applied for all government procurement until the end of 2026.

In addition, the plan proposed creating a channel to share central government procurement information with financial institutions to enable commercial banks to expedite loan support for SMEs.

It also addressed “irregular behaviours”, including discriminatory terms against certain purchasers and bid rigging by some suppliers.

It reflects the inequality between the state-owned and private sector
Peng Peng, Guangdong Society of Reform

The State Council statement came as Beijing seeks to restore confidence among SMEs amid low expectations in the private sector following stringent and abrupt regulations in predominantly private sectors such as real estate, video gaming and off-campus education since 2021.

“In fact over the past few years, it has been difficult for SMEs to win government procurement projects, and many bidding projects require state-owned enterprises to compete, but it is actually operated by private companies,” said Peng Peng, executive chairman of the Guangdong Society of Reform.

“Such cumbersome procurement raises the cost of doing business for private enterprises and enables state-owned companies to profit without effort, and it reflects the inequality between the state-owned and private sector.”

The initiative is also intended to improve the operating conditions for struggling private enterprises, and continues Beijing’s previous efforts to support the sector, Peng added.

Meanwhile, the action plan said it would upgrade the central government’s e-platform for national information sharing on supplier enterprises, using digital technology to eliminate local protectionism and hidden barriers.

Many SMEs and overseas investors have long complained about local protectionism in China, where some governments prioritise local enterprises’ products and create various barriers for foreign or non-local enterprises, Peng said.

The document also said it would ask local governments to increase their procurement of green building materials, expanding the policy’s scope from the original 48 cities to 100 cities.

“This aligns with Beijing’s long-standing pursuit of low-carbon, green development, and government procurement plays a crucial role in promoting this initiative,” Peng said.

“Even as Beijing pursues its carbon peaking and carbon neutrality goals, it must further consider increasing relevant purchases from SMEs, especially as these businesses are looking for more hope under the current sluggish domestic economy.”

In China, the private sector generates over 60 per cent of gross domestic product and accounts for more than 80 per cent of urban employment.

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