China Introduces New “Domestic Product Standards” for Government Procurement
Beginning January 1 next year, China will implement a unified national standard defining “domestic products” within the field of government procurement. This marks a significant step toward strengthening regulatory clarity, improving procurement efficiency, and ensuring that government purchasing activities reflect national policy priorities. The new framework, issued through the State Council’s “Notice on the Implementation of Domestic Product Standards and Related Policies in Government Procurement,” provides a detailed definition of domestic products and outlines how these products will be reviewed and evaluated during procurement processes.
Defining What Qualifies as a Domestic Product
Government procurement in China must, according to the Government Procurement Law, prioritize the purchase of domestic goods, projects, and services. However, until now, the absence of a unified standard has created ambiguity for suppliers, procurement agencies, and regulators. The new Notice addresses this gap by establishing a clear, three-part definition of domestic products.
First, products must be produced in China in a way that transforms raw materials or components into goods with entirely new attributes. This requires substantive manufacturing or assembly processes and explicitly excludes simple packaging, OEM work, or minimal finishing such as painting or polishing. Second, the cost of components produced in China must reach a prescribed proportion, which will be specified by industry. Third, certain products must meet additional requirements for key components and processes, jointly determined by the Ministry of Finance and relevant industry authorities.
This approach ensures that the designation of “domestic product” reflects genuine value creation within China rather than superficial assembly or repackaging activities.
Introducing Price Adjustments to Support Domestic Goods
One of the most notable elements of the new framework is the introduction of price deductions for domestic products during procurement evaluations. When domestic and non-domestic products compete in the same procurement project, a 20% price deduction will be applied to the quotation of domestic products for review purposes. This adjustment does not reduce the actual payment amount but enhances the competitiveness of domestic goods in the evaluation process.
Such policy instruments are widely used in major global economies to guide industrial development, strengthen supply chain resilience, and ensure that public spending supports national economic objectives.
Aligning with International Practice and Long-Term Policy Goals
The introduction of domestic product standards is part of a broader, multi-year initiative to regulate market order, establish a modern regulatory system, and promote industrial upgrading within the government procurement ecosystem. The standards also align with the “2025 Action Plan for Stabilizing Foreign Investment,” which emphasized the need for clear procurement guidelines.
By defining domestic products through transparent criteria, the policy aims to stabilize social expectations, enhance policy predictability, and stimulate industrial development. Clearer standards are also expected to support macroeconomic stability by reinforcing domestic demand and encouraging investment in local production capabilities.
Ensuring Equal Treatment for All Types of Enterprises
The Notice emphasizes that the new government procurement support policies apply equally to state-owned, private, and foreign-funded enterprises. Procurement entities are explicitly prohibited from designating specific brands, restricting participation based on brand registration location, or discriminating against suppliers based on ownership structure or investor nationality.
Industry analysts note that these clarifications help solidify the foundations for fair competition. Foreign enterprises that have invested in meaningful localization efforts will be able to participate on equal terms, benefiting from the same incentives as domestic firms. According to the Ministry of Finance, the policy reflects China’s commitment to national treatment for foreign-funded enterprises within the government procurement system.
A Transition Period to Support Industry Adjustment
To ensure a smooth transition and allow industries to adapt, the new regulations will be implemented gradually. Over the next five years, the Ministry of Finance and the Ministry of Industry and Information Technology will develop product-specific domestic product standards, with individual industries receiving a transition period of three to five years. This phased approach recognizes the technical complexity involved in calculating component proportions and evaluating key production processes across China’s extensive industrial landscape.
During the transition period, products produced in China will be considered domestic as long as they meet the requirement for in-country production, even if component cost ratios and key process requirements have not yet been finalized. This flexibility offers suppliers, including foreign-funded manufacturers, sufficient time to adjust production layouts and investment plans in response to the evolving standards.
Strengthening the Long-Term Governance of Government Procurement
The implementation of unified domestic product standards represents a major advancement in China’s effort to standardize and modernize government procurement. By providing clarity on definitions, evaluation criteria, and transition timelines, the policy supports a more transparent, fair, and innovation-driven procurement environment. Over time, the standard system is expected to contribute to higher-quality governance, healthier market competition, and more efficient allocation of public resources.
As China continues refining its procurement mechanisms, the new standards signal a commitment to strengthening domestic industrial capabilities while maintaining an open and equitable environment for all qualifying suppliers.