China’s Wind Turbine Bidding Process Unfair, Say Foreign Firms

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Foreign manufacturers say they are being unfairly excluded from competing for state renewable energy projects resulting from China’s economic stimulus packageBut Beijing says because purchases for state investment projects

count as government procurement, priority must be given to domestic

products unless such a purchase is commercially unviable.

Joerg Wuttke, president of the European Union Chamber of Commerce in

China, said recently that foreign companies were effectively shut out

of the process when a US$7 billion package to manufacture 25 wind

turbines was made available. “It seems that the central government has

decided that this must be awarded to Chinese manufacturers and not

foreigners who have invested big in China,” Wuttke told the Financial


Four of the world’s top five wind turbine companies – Vestas Wind

Systems (Denmark), GE Energy (US), Gamesa (Spain), and Suzlon Energy

(India) – were rejected early in the bidding process. Companies engaged

in alternative energy production have been anxiously anticipating the

implementation of China’s stimulus package. Investments in areas such

as wind power are expected to be a high priority due to China’s efforts

to reduce its dependency on fossil fuels – Beijing has said that

wind-generated energy in the country will increase tenfold over the

next decade.

But foreign companies are calling foul over their exclusion from the

process. Despite going to great lengths to meet the country’s

‘localisation’ requirements – rules requiring that a minimum of 70

percent of a given manufacturer’s equipment be sourced and built in the

country – foreign companies say they continue to be shut out of state

wind energy projects.

Foreign companies also say that an initiative to eliminate sub-1

megawatt wind turbines from China is discriminatory to foreign firms as

large capacity units are less common outside the country. But officials

insist that this preference is based on local conditions, rather than

an effort to buoy local manufacturers.

”The size of the turbine isn’t a strict government policy, but it is

a market decision made by enterprises,” Shi Liyan, the head of

renewable energies at the National Energy Administration, told Reuters.

“It is about wind conditions and the use of land, and investors are

willing to choose bigger turbines.”

Beijing counters that Chinese companies are similarly blocked from

major investment deals around the world. This sentiment was bolstered

last week when the multinational mining company Rio Tinto abandoned

talks with Chinese metals giant Chinalco, in favour of a deal with

Anglo-Australian miner BHP Billiton.

China’s wind power is not the only sector under scrutiny by foreign

firms. These critics also charge that similar conditions were faced

when US$2 billion in contracts were awarded to the rail sector and

others have complained that the country’s use of tax rebates is a

veiled form of protectionism.

China is not a party to the WTO’s Government Procurement Agreement –

the plurilateral agreement designed to prevent discrimination against

foreign companies when awarding state contracts. However, Beijing does

have observer status.

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