China secretly orders state-owned enterprises to use 100% Chinese-made products, hiding from the US

U.S. President Joe Biden (left) and Chinese President Xi Jinping
[Photo by AP Yonhap News]

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[Asia Economy Reporter Park Byung-hee] Amid the intensifying power struggle between the United States and China, it has been revealed that the Chinese government secretly issued a 'Buy China' directive to state-owned enterprises last May. This move counters U.S. President Joe Biden's 'Buy American' executive order, which encouraged federal agencies to favor domestic products during his first week in office on January 25.

According to major foreign media on the 2nd (local time), China's Ministry of Industry and Information Technology (MIIT) issued a document titled "Government Procurement Audit Guidelines" to state-owned enterprises on May 14. In the 70-page document, the Chinese government demanded that the proportion of Chinese-made products be increased from 25% up to 100% for a total of 315 products. These 315 products included a large number of medical devices such as X-ray and magnetic resonance imaging (MRI) equipment, which are key U.S. exports. In addition to medical equipment, the list included ground radar equipment, testing machines, optical devices, items used for animal breeding, seismic equipment, and marine, geological, and geophysical instruments.

A former U.S. government official who obtained a copy of the document pointed out that issuing such internal guidelines was not agreed upon when China joined the World Trade Organization (WTO). The official also noted that the document violates the U.S.-China trade agreement signed in January last year. At that time, China agreed to purchase an additional $200 billion worth of U.S. goods and services over two years from 2020 to 2021 compared to 2017 levels.

Chad Bown, a fellow at the Peterson Institute for International Economics, analyzed that 18 months after the U.S.-China trade agreement, China had achieved only about 60% of the target amount. It is argued that the issuance of the Buy China directive has made it even more difficult to meet the $200 billion target. China purchased $124 billion worth of U.S. products last year.

Medical equipment was among the products China promised to purchase in large quantities under the U.S.-China trade agreement, but the new document demands that the Chinese-made ratio for MRI equipment be raised to 100%.

As of 2018, the U.S. exported $47.5 billion worth of medical equipment from companies such as Johnson & Johnson, General Electric (GE), and Abbott. According to Fitch Solutions, exports to China accounted for only $4.5 billion of this amount. It is known that China's imports of U.S. medical equipment decreased between 2018 and 2019 but have been increasing again since the U.S.-China trade agreement last year.

Given the ongoing U.S.-China trade tensions, dissatisfaction in the U.S. is expected to grow further due to the issuance of the Buy China directive.

A U.S. official pointed out that MIIT's Buy China directive differs from the U.S. Buy American executive order in that China has not made the document public. He criticized that, in a situation where China already does not clearly disclose trade-related information, secretly issuing the Buy China directive could pose even greater problems.

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