China Eases Rules That Irked Foreign Firms

The Wall Street Journal reports:

China's Ministry of Finance said it is scrapping certain rules that foreign companies say favored domestic products for government procurement, a significant step toward easing concerns that global companies would be excluded from billions of dollars in contracts.

As part of a broader government initiative to foster "indigenous innovation," the Finance Ministry had issued a series of regulations in the past several years requiring products bought by the government to have Chinese intellectual property. Those rules and related ones from other ministries triggered a backlash among foreign companies and became one of the biggest sources of trade friction with the U.S.

In a brief statement posted on its website, the Finance Ministry said that "after research," it had decided from July 1 to "stop enforcing" three regulations related to the procurement policy. It named the rules—to do with budget, screening and contract management—but didn't otherwise elaborate.

In January, Chinese President Hu Jintao, on a state visit to the U.S., agreed to delink Beijing's innovation policies from its government-procurement preferences and pledged that China wouldn't discriminate against products from foreign suppliers. But executives and officials have been waiting for formal statements from China's central government implementing that policy and telling other arms of government to comply.