SOE purchase reform set to spur SMEs

China's efforts to better regulate the procurement activities of its centrally administered State-owned enterprises will encourage the purchase of more innovative products and provide new growth opportunities for small and medium-sized enterprises, said analysts on Wednesday.

The State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, China's top State assets regulator, and the National Development and Reform Commission, the country's top economic regulator, recently issued a guideline on regulating central SOEs' procurement activities to build a transparent and efficient supply chain.

The document aims to achieve the best performance-to-price ratio and optimal comprehensive cost over the entire lifecycle by further clarifying procurement methods.

It also enhances regulations on how central SOEs can support technological innovation through procurement, encouraging them to take the lead in adopting innovative products in key areas such as satellite navigation, chips, high-end machine tools, industrial robots and advanced medical equipment.

Ding Rijia, a professor specializing in industrial economy at the China University of Mining and Technology in Beijing, said that the new policies can help central SOEs use the funds wisely, minimize illegal risks and ensure that procurement processes are open and fair.

"By standardizing procurement practices, the government will be able to build a more resilient industrial supply chain," said Ding, adding this reduces vulnerabilities to disruptions and enhances the overall stability of the economy.

Speaking at a news conference in Beijing on Wednesday, Chen Bin, deputy director of the expert committee at the Beijing-based China Machinery Industry Federation, said that adopting cutting-edge technologies and products also allows central SOEs to maintain and reinforce their competitiveness in the global market.

With years of technology accumulation, Chinese manufacturers are capable of producing high-end machine tools and industrial robots. This can ensure a steady supply of critical components and technologies for central SOEs, said Chen.

Domestic companies can also tailor high-end machine tools, industrial and service-themed robots to meet the specific needs of central SOEs in different sectors, providing more adaptable and customized solutions to enrich their operational capabilities, he said.

Aiming to stay at the forefront of the latest technological and industrial advances, the SASAC announced in late July that central SOEs will invest over 3 trillion yuan ($417.54 billion) in large-scale equipment upgrades over the next five years.

Central SOEs will implement a series of intelligent transformation, digital transition and network connectivity-themed projects to promote the integration of new technologies like artificial intelligence with all aspects of the manufacturing process, the SASAC said.

Chen Jianwei, a researcher at the Beijing-based University of International Business and Economics' Academy of China Open Economy Studies, said the investment by central SOEs can also stimulate more involvement from the private sector, especially SMEs, fostering a more dynamic and competitive industrial environment.

The guideline encourages central SOEs to better fulfill their corporate social responsibility by supporting SMEs in their bid to participate SOE procurement activities.

Central SOEs should not restrict suppliers based on location, ownership type, organizational form, registered capital and equity structure, or set other unreasonable conditions to exclude or limit SMEs from taking part in procurement activities, said the document.

Under favorable conditions, SMEs can gain more access to procurement opportunities with central SOEs. This not only significantly expands their market reach and customer base but also stimulates innovation and enhances their products and services, said Chen.

Late last month, the SASAC called for efforts to improve the mechanism regulating the reasonable flow of State capital, promote the revitalization of existing assets and the disposal of inefficient assets, and free up more resources for core technology breakthroughs in key fields and strategic emerging industries.

Central SOEs saw their profits grow by 1.9 percent year-on-year to 1.4 trillion yuan in the first half of the year, SASAC data showed.