Introduction

This Factsheet outlines the current progress in advancing Sustainable Public Procurement (SusPP) in the Republic of China based on a desk review. It applies an analytical framework of six Pillars (or "building blocks") of SusPP systems.

The Framework is designed to make clear that countries do not need to follow a linear step-by-step path to build effective SusPP systems. Rather it is important to examine local contexts and prioritize the Pillars with the most potential in the country. No matter where a country starts, a balanced approach to implementation calls for progress on all Pillars to some degree.

This Factsheet is organized as follows:

• "Country Overview" section with executive summary, indicative maturity rating, key achievements, potential pathways forward and timeline of key events related to advancing sustainable public procurement.
  
• "State of Play & Forward Looking Analysis" section that summarizes the research findings from the desk review for each Pillar theme.
  
• "Key Stakeholders Driving the Agenda" explores opportunities for ADB teams to open discussions with country counterparts and add value to the work of partners.
  

The Factsheet is intended to be a living document that will be revised and improved as new information is uncovered and advances are made. It is designed to support the ADB training programs on SusPP.

China has experienced massive economic growth, lifting 800 million people out of poverty over the past 40 years. This sustained growth has come coupled with dangerous levels of air pollution, GHG emissions and environmental degradation. China is the world’s top emitter, producing more than a quarter of the world’s annual greenhouse gas (GHG) emissions. The industrial sector is the biggest source of emissions - the construction industry alone contributes over 50% of the nation’s carbon footprint. Massive production of cement and steel, both high emitting industries, is a major cause.

Public procurement in China accounts for 3.6% of GDP, amounting to 538 billion USD. The implementation of Sustainable public procurement (SPP) practices in the country started in 2006 by using of government approved lists of energy efficient and eco-friendly suppliers. Over the last decade, SPP practices focused on advancing social policies to support small and medium enterprises (SMEs) and local suppliers. The country is making good progress in shifting to a greener development pathway. China reduced the amount of harmful particulates in air by 40% from 2013 to 2020 due to restrictions on car use and coal burning in major cities. It signaled a major shift in its Belt and Road Initiative (BRI) towards greener practices, publishing Green Investment Principles in November 2018. In September 2020, China made the pledge to halt the rise of its carbon emissions by 2030, and cut its net carbon dioxide emission to zero by 2060. While significant progress has been made in SPP implementation in the country, opportunities exist to expand into construction and infrastructure sectors.

Maturity Level:

Intermediate-Advanced

>> Snapshot of Sustainable Procurement Maturity Level

Key Achievements

• Longstanding SPP practices for energy efficient (2004) and eco-friendly goods (2006)
  
• Listing of green goods and products makes it simple for procurers to choose green
  
• High-level, comprehensive policy vision for green development and social inclusion
  
• Increase in use of procurement preferences for SMEs and local job creation
  
• Potential to expand into green building and infrastructure due to recent developments
  

Potential Pathways Forward

• No specific law or policy with a comprehensive framework for SPP implementation
  
• Lack of tools (other than green product listings) to conduct SPP, especially on circularity and carbon neutral criteria
  
• Lack of interest and training of procurement offices to understand sustainability criteria
  

>> Timeline of Implementation of SusPP Policies and Activities

2004

2007

2015

2021

2022

Energy Conservation Products List & Environmental Label Products List launched

Procurement from ECP list made mandatory for government agencies

ICLEI East Asia launched Green Public Procurement China Partnership

Online platform for Chinese suppliers launched under UNDP project with goal to reach carbon neutrality

1st mandatory document for regulating carbon emissions from buildings and construction issued

Pillar 1: Government Vision & Awareness of SusPP

Governments that establish a clear policy vision on SusPP can accelerate the shift from procurement as an adminstrative to strategic function, making clear how SusPP can deliver on important national social and environmental goals.

PRC China does not have a dedicated action plan for sustainable procurement. However, it has set several policy priorities that sustainable procurement could contribute to achieving.

Climate Change

China has set clear climate ambitions - pledging to reach carbon neutrality by 2060, as well as halt the rise of carbon emissions by 2030. The 14th Five-Year Plan (2021-2025) prioritizes high-quality green development and deeper social inclusion. During 2021–2025, energy and carbon intensity are targeted to decline by 13.5% for energy and 18% for carbon intensity per unit of GDP. Innovation-driven growth is considered the key to long-term growth sustainability.

Job creation

The 14th Five-Year Plan reflects China’s increased focus on people-oriented development in the recent decade. Urban-rural inequalities are highlighted as a key challenge. In response, the Government prioritises the creation of employment opportunities in rural areas to encourage labor migrants to return and diversify income generating activities (e.g. green jobs) across the country.

Energy efficiency

China’s economy is energy intensive and improving energy efficiency has been a long-standing goal. A 70% decrease in energy intensity per unit of GDP was achieved from 1980-2010 mainly due to energy efficiency gains. By 2017, over 60% of China’s energy use was covered by mandatory energy efficiency policies—more than any other nation in the world.

Air Pollution

Air pollution levels in China’s major cities remain at dangerous levels for human health. The Chinese Government promotes the purchase of “New Energy Vehicles” (NEV) which includes all plug-in electric vehicles (e.g. battery, hybrid, fuel cell), aiming for 40% NEVs in total vehicle sales by 2030. The NEV Industry Development Plan (2021-2025) aims to improve the value chain of power batteries through an extended producer responsibility scheme and better end-of-life treatments. New vehicle emission standards aligned with the Euro 6 standard are expected to take effect in July 2023 (originally planned for July 2020 but delayed due to the COVID pandemic).

Sustainable Infrastructure

The Government has signaled its commitment to sustainable infrastructure projects. Since 2017, the central government has reoriented its Belt and Road Initiative towards environmentally sustainable “high quality” infrastructure. It launched Green Investment Principles in 2018 and invited financial institutions around the world to be signatories in support of these voluntary green finance guidelines towards low-carbon infrastructure.

Green Buildings

In November 2022, the Ministry of Industry and Information Technology (MIIT) released the Action Plan on Peaking Carbon Dioxide Emissions in the Building Materials Industry. It sets out 15 key tasks in five aspects to step up total capacity control, improve the level of solid waste utilization, and reduce the use of high-carbon materials. It also stresses efforts in accelerating the research and innovation of low-carbon technologies, promoting energy-saving and carbon-reducing technologies and equipment, and building systems for the production of green building materials and products.

Pillar 2: Legal & Regulatory Framework

Procurement law reform can be key to clear obstacles to implementation by establishing "value for money", not "lowest price", as a core procurement objective, and authorizing procurement approaches suited to SusPP.

The legal basis for sustainable public procurement in China is provided by the Government Procurement Law issued in 2002, China’s Bidding Law issued in 1999, and Promotion Law on Cleaner Production issued in 2002. Procurers can choose between three methods for bids evaluation and contract award: lowest evaluated bid (pass/fail evaluation criteria), merit point evaluation (based on technical and functional specifications) and value for money (however this latter is rarely used in practice). Notably, the procurement law framework does not cover state-owned enterprises nor infrastructure projects. China is an observer to the WTO Agreement on Government Procurement currently in accession negotiations, a motivator for the country to adopt SusPP aligned with international standards.

The current procurement law framework offers scope for SusPP by emphasizing the need to take into account protecting the environment, supporting the development of less developed areas or ethnic minority areas, and promoting the growth of small and medium-sized enterprises. It stipulates that priority should be given to products that are environmentally friendly and will be resource efficient.

China officially launched SPP in practice with the issuance of a Energy Conservation Products (ECP) list (in 2004) and an Environmental Label Products (ELP) list. These lists were created to make it simple for local procurement authorities to identify and purchase environmentally-friendly products from priority categories. Procurement from the ECP list was made mandatory for government agencies in 2007, for products including air conditioners, fluorescent lamps, televisions, electric heaters, computers, printers, monitors, urinals and water faucets. However, purchases from the ELP list remain recommended but voluntary, likely due to the increased complexity to measure eco-friendly criteria in comparison to energy savings (for the ECP list). Further policies were passed in support of preferential procurement of circular products (that offers savings and/or reuse in energy, water and materials) and low-carbon products.

Pillar 3: Institutions & Capacity

China operates a centralized and multilevel procurement system. At the national level, the central government formulates the principles and allocates the budgets for SPP to local authorities. At the local level, local public procurement centers implement procurement, specify and customize regulations, and train procurement officers. Local authorities may formulate local regulations and policies for operationalizing the procurement requirements. However, local policies and regulations must be the same as or higher than the national threshold.

The China Quality Certification Center is responsible for updating the Energy Conservation Products list with the National Development and Reform Commission. The China Environmental United Certification Centre is the certifying agency for the Environmental Labeling Products list, along with the Ministry of Environmental Protection.

No specific training courses or guides on SPP exist, mainly due to the fact that SPP is practiced on the basis of the ECP and ELP lists. Procurers do not have motivations to build their capacity on environmental and social issues, as they simply need to choose products from pre-approved lists.

Recent studies have indicated that public procurers that practice SPP are mainly motivated by mandatory requirements. A major barrier has been identified as a lack of trust in the information on the sustainability of the product provided by producers and suppliers.

Pillar 4: Market Practices & Sustainable Supply Chain

Market dialogue throughout the procurement process helps procuring entities to choose realistic sustainability criteria and ensure suppliers succeed in delivering on sustainability commitments over the contract duration.

Suppliers can become eligible for GPP practices through certification and registration on the ECP or EPL lists. A UNDP project was launched in 2021 to create a platform for Chinese businesses to register and participate in the global public procurement market including UN procurements, with the ultimate aim of carbon neutrality.

Pillar 5: Procurement Operations

Various tools and procurement approaches can be employed to help procurers more easily identify environmentally friendly goods and services and attract a competitive market response.

Directories

The most useful and utilized tools to support procurers to practice SPP are the ECP and EPL lists. A recent study found that 100% of all identified tenders with sustainability criteria specified products from the ECP list, while 74% specified products from the ELP list. The use of other tools (e.g. life-cycle costing, international ecolabels, ISO certifications) was minimal, showing up in less than 5% of procurements. These other tools are not promoted to procurers in the Chinese SPP system.

A criticism of this list system is that the product groups covered by the two lists are limited, and thus only a small part of the necessary goods can be selected from the lists. It can be time-consuming and costly for suppliers to obtain certifications and the evaluation criteria may not reflect the latest innovations. This approach leaves no room for suppliers to propose innovative solutions.

Fiscal Incentives

The Chinese Government has created other tools and fiscal incentives to promote Green Public Procurement (GPP). For example, in 2009, public offices or organizations that purchased green vehicles accessed economic subsidies of 10% for vehicles with an overall environmental label (assumed to be 100% environmentally sound), 5% for those with over 50% ecolabelled parts, and 1% for those with less than 50% ecolabelled parts. Another example is the Goods Packaging Standard for Government Procurement set a voluntary requirement for packaging material contains at least 75% renewable fibers.

Green Building Code

In April 2022, the first mandatory document for regulating carbon emissions from buildings and construction was issued by the Ministry of Housing and Urban-Rural Development - the General Code for Building Energy Conservation and Renewable Energy Utilization. The Code sets goals for all new urban buildings in China to be constructed in line with green building standards by 2025 and to raise the utilization of renewable energy in buildings from 6% in 2020 to 8% by 2025.

Pillar 6: Monitoring & Impact Measurement

Monitoring systems are essential to gather the information needed to keep SusPP implementation on course and communicate on the benefits achieved for the country.

The Government does not have a systematic procurement monitoring and reporting framework in place. However, several studies have been undertaken to assess the progress and impact of China’s SPP system. Key findings in 2020 include total procurement spend on environmental labelling products was 81.35 billion Yuan RMB and number of listed products have increased from 856 in 2006 to 1 million, covering over 90 product categories. Procurement of ecolabelled office desktop computer and notebook computer achieved emission reductions of 1.719 million t CO2, equivalent to annual carbon sink of 191000 hectares of forest.

A worrying trend is that while China’s public procurement spending has more than doubled from 2014 to 2020, the proportion of tenders with sustainability criteria has decreased, particularly between 2018 and 2020. However, at the same time, support to SMEs and local producers has increased in line with procurement spend - showing that SPP in China is becoming more socially responsible procurement than green procurement. Procurers are also assigning higher scores in bid evaluations to social criteria (about 20%) than environmental criteria (10–15%)

Projects Supported by ADB

to come

Other Initiatives supported by National/International Agencies

UNDP (2021-) Project ‘Knowledge Sharing, Capacity Building, and Supporting Service on Sustainable Procurement of UN/International Organizations’.

• platform for Chinese businesses to get involved in the global public procurement market, with the ultimate aim of carbon neutrality.
  
• resources and support to small- and medium-sized businesses (SMEs), along with female-owned firms.
  

allows Chinese companies, especially in the Yangtze River Delta region, to participate in procurement for the United Nations

In 2015, ICLEI East Asia, together with Chinese and global Partners launched the Green Public Procurement China Partnership to scale up GPP implementation in China and has since then expanded our works by promoting the latest knowledge and practices of green and sustainable public procurement. In embracing more East Asian cities, ICLEI decided to reinforce the existing Partnership by expanding its structure in 2018, under the new name Procura+ East Asia.

Resources

Cao, Fuguo and Li, Runyu and Cao, Xiaoyan, 2022. Implementation of sustainable public procurement in China: An assessment using quantitative text analysis in large-scale tender documents, Frontiers in Environmental Science, Vol. 10, https://www.frontiersin.org/articles/10.3389/fenvs.2022.947962,

DOI 10.3389/fenvs.2022.947962.

International Institute for Sustainable Development (IISD). How green public procurement contributes to sustainable development in China. In IISD Report; IISD: Winnipeg, MB, Canada, 2015; pp. 17–31. Available online: https://www.iisd.org/publications/ how-green-public-procurement-contributes-sustainable-development-china

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