2011 report to congress - U.S.-China Economic and Security Review ...

45Fortune Global 500, compared to just two American companies. 110China’s own list of the 500 biggest Chinese companies showed thatamong the top 100 firms traded on the stock exchange, the governmentcontrolled the majority of the stock in 75. 111Chinese SOEs and Government ProcurementThe U.S. government has taken the position that China’sSOEs as well as provincial and local government agencies shouldbe considered as part of the Chinese government when procurementdecisions are being made. China has responded by insistingthat central, provincial, and local SOEs, and provincial and localgovernment agencies should not be considered as part of the governmentunder the WTO’s Agreement on Government Procurement(GPA). This would allow China to limit foreign companies’access to the lucrative procurement market. A country’s accessionto the GPA is subject to negotiation between the applicantand GPA members. China’s refusal, so far, to include SOEs hasbeen one of the impediments to China’s accession to the 40-memberGPA, despite China’s promise in 2001 that it would sign theGPA ‘‘as soon as possible.’’By refusing to consider China’s state-owned sector as part ofthe government, China seeks to wall off a large portion of itseconomy from the GPA rules that members have agreed to abideby. These rules generally ensure foreign companies equitable accessto central and local government procurement for goods andservices. By seeking to exclude foreign firms from governmentand SOE contracts, China puts U.S. manufacturers and serviceproviders at a disadvantage.China’s latest offer to join the GPA was issued in July 2010.While the latest offer made certain improvements, there remainedsignificant shortcomings. For example, while the newoffer expanded the coverage of central government entities, itstill would not cover provincial or local government agencies orSOEs. 112 In 2009, the Chinese government estimated that itsprocurement market surpassed $100 billion, but this is a significantunderstatement of its true size. For example, the ChineseMinistry of Finance’s limited definition of government procurementspending does not include most government infrastructureprojects, and procurement by SOEs is not included, even whenSOEs perform government functions. 113 Factoring in all of theseconsiderations, the European Union Chamber of Commerce inChina estimates the size of China’s government procurementmarket at $1 trillion. 114dkrause on DSKHT7XVN1PROD with $$_JOBVerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00057 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464