China has unveiled a major policy shift to enhance transparency and fairness in government procurement. The General Office of the State Council recently issued the Notice on the Implementation of National Product Standards and Related Policies in Government Procurement, introducing what is now known as the “Domestic Product Standard.” The measure clarifies how “domestic products” are defined, levels the playing field for foreign-invested enterprises, and reinforces China’s commitment to a predictable and transparent business environment.
Defining What Counts as a Domestic Product
At the heart of the new policy there is a clear definition of what constitutes a domestic product in government procurement. To qualify, a product must be manufactured in China, transforming imported raw materials or components into finished goods. In addition, a set proportion of the product’s total cost must be derived from components produced within China. For certain sectors, further conditions will apply to key components and production processes, as determined jointly by the Ministry of Finance and relevant industry authorities.
This clarification resolves a long-standing ambiguity over whether goods produced by foreign-funded enterprises in China qualify as domestic products, a question that often-complicated procurement decisions and discouraged some international investors.
Encouraging Local Production Through Competitive Advantage
Under the new rules, domestic products will receive a 20 percent price evaluation advantage in tenders that include both domestic and non-domestic goods. This incentive is not intended as protectionism but as a strategic tool to strengthen local manufacturing, stimulate industrial upgrading, and stabilize economic demand. Similar mechanisms are used in major global economies to promote local production while maintaining fair competition.
Aligning With International Economic Standards
The policy reflects China’s broader commitment to integrating with high-standard international trade and economic rules. As emphasized in the Decision of the Third Plenary Session of the 20th Central Committee of the Communist Party of China, the goal is to ensure that rules, regulations, and standards are compatible with global best practices.
By clearly defining “domestic products,” China also reinforces the principle of national treatment for foreign-invested enterprises. This ensures that multinational companies genuinely localized in China, those producing within the country and contributing to its economy, can compete equally in government procurement.
Positive Reception From Industry Leaders
The business community has largely welcomed the move. Clearer procurement standards are expected to build trust among foreign investors and strengthen their confidence in expanding operations within China. Industry representatives note that the policy offers predictability and fairness, giving multinational enterprises greater visibility over their long-term investment prospects.
At the same time, the standard creates a fairer competitive landscape for Chinese enterprises, encouraging domestic firms to innovate, upgrade technologies, and improve production quality.
Gradual Implementation With a Five-Year Transition
Implementation will take place gradually. The Ministry of Finance, together with the Ministry of Industry and Information Technology and other agencies, will develop product-specific standards within five years. A three- to five-year transition period will give companies time to adapt their production structures, supply chains, and investment strategies to meet the new requirements.
This phased approach ensures stability and predictability, allowing both domestic and foreign enterprises to adjust without disruption.
A Foundation for Fair Competition and Sustainable Growth
Experts view the “Domestic Product Standard” as a foundation for fair competition and innovation rather than a market barrier. By setting transparent and measurable criteria, the policy rewards genuine investment and local value creation. It encourages domestic firms to enhance competitiveness while offering foreign enterprises a clear pathway to participate fully in China’s evolving market.
Ultimately, the initiative signals that China remains open to foreign investment and committed to improving its business environment. The new standards reaffirm that companies, whether domestic or foreign, are welcome to grow in China, provided they contribute meaningfully to its industrial and economic development.