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Since China's government procurement system was first piloted in 1996, more than a decade has passed. From institutional exploration and nationwide pilot implementation to legalized management, government procurement has made a historic leap and successfully entered a period of comprehensive development. On June 29, 2002, the 28th meeting of the Standing Committee of the Ninth National People's Congress simultaneously reviewed and adopted the Government Procurement Law and the SME Promotion Law, stipulating that government procurement should support and promote the development of small and medium-sized enterprises. In recent years, as reform and opening up have deepened, China's national economy, especially the non-public sector of the economy, has developed fully. The ranks of SMEs have also grown steadily, and they have gradually become an important force driving China's social and economic development.

Government Procurement in Promoting Development: Achievements and Shortcomings

According to the Ministry of Industry and Information Technology's Plan for the Growth of Small and Medium-sized Enterprises during the 12th Five-Year Plan Period, by the end of 2010, there were more than 11 million SMEs registered with industry and commerce nationwide and more than 34 million self-employed industrial and commercial households. Relevant data show that the total number of SMEs in China has accounted for more than 99% of all enterprises nationwide; the value of final products and services they create is equivalent to about 60% of GDP; they provide about 65% of the nation's inventions, more than 75% of enterprise technological innovation, and more than 80% of new product development; and they account for more than 80% of urban employment in China.

With increasingly fierce competition in domestic and international markets, in order to ensure the healthy and sustainable development of China's SMEs, the state has introduced numerous support policies in taxation, credit, interest subsidies, and other areas. Among them, government procurement, as an important fiscal support policy, has also been incorporated into relevant documents, regulations and laws. Article 9 of the Government Procurement Law stipulates that government procurement should help achieve the state's economic and social development policy objectives, including protecting the environment, supporting underdeveloped areas and ethnic minority areas, and promoting the development of SMEs. The SME Promotion Law implemented at the same time also clearly states that the central fiscal budget should establish an SME account and allocate special funds to support SME development; local people's governments should provide fiscal support to SMEs according to actual conditions; and government procurement should give priority to purchasing goods or services from SMEs.

Recently, Vice Minister of Finance Wang Baoan, in a speech at a series of publicity activities commemorating the 10th anniversary of the promulgation of the Government Procurement Law, mentioned that the scale of China's government procurement increased from 100.9 billion yuan in 2002 to 1,133.2 billion yuan in 2011, and its share of fiscal expenditure accordingly rose from 4.6% to 11%, with cumulative savings of more than 660 billion yuan in fiscal funds. As the reform of the government procurement system continues to advance, SMEs are participating in government procurement activities with increasing degrees and enthusiasm, an ever-expanding scope of participation, gradually strengthening competitiveness, and the contract amounts they win in bidding are also rising year by year.

But at the same time, SMEs also face significant difficulties in government procurement competition. The legal system for government procurement to support SME development is not detailed enough, and its practical operability is weak, making it impossible for SMEs to truly enjoy relevant policy preferences in actual participation. Some government procurement thresholds are high; some procurers have an overly strong preference for large enterprises and big brands and often set limits based on registered capital, artificially restricting SME competition. Many SMEs, although winning relatively large contract shares in bidding, mostly act as agents for products of large domestic and foreign enterprises; they themselves directly manufacture and provide fewer products and services, often resulting in SMEs winning bids while large enterprises profit.

Refining Policies, Encouraging Competition, Supporting and Promoting Development

In response to a series of difficulties faced by SMEs in government procurement and to further promote SME development, China's government procurement departments are also actively advancing the construction of regulations and systems, and formulating and issuing relevant implementation rules for government procurement.

In January this year, the Interim Measures for Government Procurement to Promote the Development of Small and Medium-sized Enterprises, jointly issued by the Ministry of Finance and the Ministry of Industry and Information Technology, came into formal effect. It clearly stipulates and specifies measures such as reserving procurement shares, evaluation preferences, and encouraging consortium bidding and subcontracting, thereby providing legal safeguards for increasing the proportion of goods, works and services procured by government from SMEs and expanding SME participation.

On February 1, the Premier of the State Council presided over an executive meeting of the State Council, which studied and deployed measures to further support the healthy development of small and micro enterprises, and pointed out that government procurement should reserve a certain proportion specifically for small and micro enterprises.

The Ministry of Finance issued the Key Points for Government Procurement Work in 2012 in the same month, setting out detailed arrangements for China's government procurement work this year and clearly stating that this year it will focus on expanding the scope and scale of government procurement, further improving government procurement laws and regulations, vigorously promoting the promulgation of the Regulations on the Implementation of the Government Procurement Law, issuing the Measures for the Administration of Non-Tender Methods of Government Procurement, and revising the Measures for the Administration of Bidding for Government Procurement of Goods and Services and the Measures for the Administration of Complaints Handling by Government Procurement Suppliers.

In July, the Government Procurement Center of Central State Organs issued the Specific Measures for Supporting the Development of SMEs (Draft for Comments), which laid down clear provisions for SMEs on key support projects, price deductions, encouraging enterprise alliances, separate sub-package procurement, eliminating procurement thresholds, implementing mandatory procurement, and reducing enterprise burdens, and proposed that government procurement projects worth less than 2 million yuan in furniture, software, printing and other fields be tilted toward SMEs. To ensure the support measures deliver real results, the draft requires that a "commitment system" be adopted for identifying SMEs during the review and supplier database entry review processes, so that SMEs can receive more policy support.

Cultivate Strengths Both Internally and Externally to Meet Challenges and Expand Markets in Line with Policies

Although in recent years the state has consistently emphasized supporting and promoting SMEs through policy, for SMEs, policy support alone is far from enough if they are to achieve substantial development in the highly competitive government procurement market. Only by enhancing their own strength, deepening their understanding of government procurement, and overcoming the problems that arise in the course of development can they further improve their own development in the government procurement market.

Choose bidding projects according to one's capabilities. Because SMEs are generally newly established and suffer from numerous problems such as outdated technology, lack of funds, financing difficulties, and weak independent innovation capability, it is impossible for them to take part in every government procurement project. Therefore, SMEs should rationally assess their own strength, conduct reasonable market analysis based on the requirements of the procurement project, and select suitable projects for bidding competition.

Strengthen credibility building. In government procurement activities, suppliers should put integrity first and truthfully fill in their basic information and performance record; when performing contracts after winning bids, they should do their utmost to provide products and services and avoid passing off inferior goods as superior, resorting to deception, or supplying counterfeit and shoddy products, thereby dispelling purchasers' misgivings about SMEs and better developing the government procurement market.

Improve understanding of government procurement. Some SMEs still do not understand government procurement procedures, are unfamiliar with relevant government procurement regulations, and know very little about policies supporting SMEs; some even mistakenly believe that government procurement is a market for large enterprises and, "knowing their place," voluntarily choose to withdraw. In this regard, SMEs should strengthen their understanding of government procurement, study relevant knowledge, laws and policies, and become familiar with government procurement procedures and rules, so as to avoid launching blind attacks and returning defeated.

For SMEs, there are both opportunities and challenges in the course of their development. In the face of strong support from government procurement, SMEs should strive to improve themselves and promote their own healthy and smooth development in the government procurement market.

— This article is reposted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-361998.html