China Procurement Budget to Hit 1 Trillion Yuan in 2012

State-run China Daily has announced the expansion of the Chinese government procurement program. Experts estimate that Chinese authorities will spend over one trillion yuan, that’s over 150-billion US dollars, on procurement this year. This includes the awarding of infrastructure contracts such as high-speed rail, building projects, as well as the purchasing of items such as vehicles.

Chief Legal Consultant at the China Society of Economic Reform Gu Lianhai says that although this investment can stimulate the economy, much of the money is then wasted.

[Gu Liaohai, Chief Legal Consultant, China Society of Economic Reform]:
"The high speed rail from Shanghai to Beijing, that is over 400-billion US dollars of investment, just one kilometer of public road costs 15-million US dollars, but who is overseeing this investment? There is no mechanism to transparently disclose this information. Have a look at the purchases of the Maotai government in Guizhou, government consumption. They are still spending our taxpayers’ money. What is more, if we sue the government, the courts don’t dare to take the case. Also, no emergency relief mechanisms are in place."

Chinese authorities say they are eager to give priority to medium and small sized companies in awarding contracts—something lacking in the past. Authorities usually favor domestic companies, but there are sectors of the market where Chinese suppliers lose out to foreign competition.

[Gu Liaohai, Chief Legal Consultant, China Society of Economic Reform]:
"Official government vehicles cost over 15-billion US dollars per year, most of the ones bought are overseas brands. If they were to promote and protect China’s car industry, China’s car industry would be very advanced, including other industries related to it. It could resolve a lot of unemployment problems in society, and allow China’s economy to develop to an even greater degree."

According to data from the Ministry of Finance, China’s procurement budget has risen by an average of 23.5 percent per year over the last five years. It would only need a 10 percent increase to reach 1-trillion yuan in 2012.