By Richard van Ostende
The introduction of uniform national standards for ‘domestic products’ within Chinese government procurement as of January 1, 2026 marks an significant policy shift for foreign companies operating in China. With the new framework, the Chinese government creates greater clarity regarding the criteria used to classify products as ‘domestic’ in public tenders. At the same time, the measure aligns with broader ambitions in industrial modernisation, strengthening strategic supply chains, and further localizing production.
For foreign enterprises, the policy brings both opportunities and points of attention. Companies that already possess substantial production capacity and a strongly localized supply chain in China stand to benefit from clearer regulations and better access to procurement advantages. At the same time, enterprises that rely heavily on imported components or limited local production may need to rethink their localization strategy to remain competitive.
Furthermore, the new rules underscore the growing importance of local value creation within China’s rapidly evolving industrial landscape. For foreign investors, supply chain localization, strategic partnerships, and long-term investment planning are therefore becoming increasingly decisive factors for their position in the Chinese market.
Summary
• On January 1, 2026, China implemented a uniform national standard for the definition of ‘domestic products’ within government procurement. Strengthening regulatory framework and consistency across procurement processes.
• A product is classified as ‘domestic’ if it is substantially manufactured in China, meets minimum local component costs requirements, and complies with sector-specific demands for critical components and production processes.
• Domestic products receive a 20% price reduction for evaluation purposes during tender assessments. This enhances their competitive position without altering the actual purchase price.
• The policy aims to support industrial modernization, supply chain resilience, and domestic demand, in line with China’s long-term economic goals.
• State-owned enterprises, private companies and foreign-invested enterprises are treated equally, provided they meet the localization requirements. This emphasizes fair competition and national treatment.
• A phased implementation period of up to five years allows industries and suppliers to adapt production and supply structures as sector-specific standards are gradually introduced.
Definition of a ‘Domestic Product’
According to China’s Government Procurement Law, public tenders must give priority to domestic goods, projects, and services. Until now, however, a uniform definition was lacking, leading to ambiguity for suppliers, procuring entities, and regulatory authorities. The new regulations address this by establishing a clear, three-part definition of ‘domestic products’.
First, products must be manufactured in China in a manner that transforms raw materials or components into goods with new characteristics. This requires substantial manufacturing or assembly activities and explicitly excludes simple packaging, OEM activities, or minimal finishing – such as painting or polishing.
Second, the share of locally produced components must meet a prescribed minimum percentage, which will be determined on a sector-by-sector basis.
Third, certain products must meet additional requirements regarding critical components and production processes, jointly established by the Ministry of Finance and relevant industry authorities.
This approach ensures that the ‘domestic product’ qualification is based on genuine local value creation in China rather than superficial assembly or packaging activities.
Introduction of Price Advantages for Domestic Products
One of the most notable elements of the new framework is the introduction of price advantages for domestic products during tender evaluations. When domestic and non-domestic products participate in the same procurement process, a 20% price reduction is applied to the bid of the local products for evaluation purposes. This adjustment does not affect the actual purchase price but strengthens the competitive position of these products during the evaluation process.
Such policy instruments are applied globally to stimulate industrial development, strengthen supply chains, and ensure that public spending contributes to national economic objectives.
Alignment with International Practice and Long-Term Policy
The introduction of domestic product standards is part of a broader multi-year policy agenda aimed at regulating the market, improving supervisory structures, and promoting industrial modernization within the government procurement ecosystem. The standards also align with the ‘2025 Action Plan for Stabilizing Foreign Investment’, which emphasizes the importance of clear procurement guidelines.
By establishing transparent criteria for the definition of domestic products, the policy aims to increase predictability, stabilize market expectations, and stimulate industrial development. In addition, the new standards contribute to macroeconomic stability by boosting domestic demand and encouraging investment in local production capacity.
Equal Treatment of Enterprises
The regulations emphasize that the new support measures within government procurement apply equally to state-owned enterprises, private companies and foreign-invested enterprises. Procuring entities may not prescribe specific brands, restrict participation based on the registration location of brands, or discriminate based on ownership structure or the nationality of investors.
According to market analysts, these clarifications strengthen the basis for fair competition. Foreign companies that have invested substantially in localization can participate on equal terms and benefit from the same advantages as Chinese enterprises. According to the Ministry of Finance, the policy reflects China’s commitment to equal national treatment for foreign enterprises within the government procurement system.
Transitional Period to Support Industrial Adjustment
To facilitate a smooth implementation and allow industries sufficient time to adapt, the new rules are being introduced in phases. Over the next five years, the Ministry of Finance and the Ministry of Industry and Information Technology will develop sector-specific standards. For individual sectors, a transition period of three to five years will apply.
This phased approach acknowledges the technical complexity of calculating local component ratios and evaluating critical production processes within China’s extensive industrial landscape.
During this transition period, products manufactured in China will be considered domestic products. The sole condition is that manufacturing genuinely takes place within China, even if the specific requirements regarding component ratios and production processes have not yet been finalized. This flexibility provides suppliers, including foreign manufacturers, with sufficient time to align their production and investment structures with the new standards.
Strengthening Government Procurement Governance
The implementation of uniform standards for domestic products represents an important step in China’s efforts to further standardize and modernize government procurement. By providing clarity on definitions, evaluation criteria and implementation timelines, the policy supports a more transparent, fair, and innovation-oriented procurement environment.
In the longer term, the standard system is expected to contribute to higher-quality governance, healthier market competition, and a more efficient allocation of public resources.
As the Chinese procurement system continues to refine itself, these new standards underline China’s ambition to strengthen domestic industrial capacity, while simultaneously maintaining an open and level playing field for all qualifying suppliers.
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This is the first article in a three-part series by Richard van Ostende on recent macroeconomic and policy developments that have a structural impact on trade with and foreign investment in China.
In part 2: Information on China’s foreign investment policy, and steps entrepreneurs can take when looking to invest.
Part 3: ‘Made in China’: identifying the criteria China establishes per industry branch (at of today, June 2026, these have not yet been finalized).
About the Author
Richard van Ostende is an economist who holds a PhD in foreign direct investment and market entry strategies of Dutch enterprises in China. With more than 18 years of professional experience in China, he possesses extensive expertise in international trade, investment, industrial policy, supply chains, and market development.
Throughout his career, Richard has held senior management and advisory positions within international corporations and public organizations. Among other positions, he served as Economic Counselor at the Netherlands Enterprise Agency and as Chief Representative of the Netherlands Trade and Investment Office in Nanjing, where he supported Dutch companies with their strategic positioning and operations in China. He has held management positions within multinational corporations in the automotive, maritime and industrial sectors.
From his work for AMC China (https://aegis-group.org/), the Institute for China Studies (www.china-studies.org) and China Insights (https://www.china-insights.org), he regularly publishes analyses and market insights on Chinese economic developments, regulations, the investment climate, and strategic trends relevant to international businesses and policymakers.
