The Chinese Ministry of Finance, Ministry of Public Security, and State Administration for Market Regulation issued a notice on June 12th, initiating the “Four Categories” of irregularities in government procurement in 2026. This includes investigating discriminatory clauses, unauthorized fees by agencies, submission of false materials for bidding, and colluding in bidding processes. Analysis suggests that the corruption in government procurement stems from systemic issues within the Chinese Communist Party, and this system has become entrenched and difficult to reform.
According to the notice, the Chinese Ministry of Finance, in conjunction with the Ministry of Public Security and the State Administration for Market Regulation, has been conducting similar rectifications since 2024. This year marks the conclusion of the three-year government procurement action plan, yet the continued scrutiny of similar issues indicates that the underlying problems have not been eradicated. The official document targets procuring entities, agencies, and suppliers for investigation, indicating that issues span across project establishment, bidding agency practices, material scrutiny, and bid competition.
The first category of issues listed in the notice involves preferential treatment towards local enterprises by procuring entities, favoring specific suppliers or products based on factors such as registration location, ownership form, shareholding structure, operational years, scale, financial indicators, etc., thereby excluding other suppliers. This practice, termed “discriminatory treatment” in the document, essentially highlights local governments exploiting procurement authority to protect local interests.
Yao Qiangsheng, a financial scholar in Fujian (pen name), expressed to reporters that while government procurement may seem to be about using fiscal funds to purchase goods and services, in reality, it revolves around the allocation of power. He stated, “Under the Chinese Communist Party system, government procurement is not a truly open market but a process where fiscal funds are redistributed by administrative authorities. In Fuzhou and Xiamen, the ability to secure a project often depends not on offering competitive prices and high quality, but rather on how much profit can be gained individually. For instance, an office desk procured by the government often exceeds market prices by tenfold or even more, with some cases escalating even further. These individuals are skilled in exploiting the system.”
Yao Qiangsheng revealed that towards the end of last year, the Ministry of Finance and the Ministry of Public Security started investigating cases of fraudulent collusion in government procurement by local institutions. He remarked, “They conspired with suppliers to inflate prices drastically, such as building a canopy for a station which might cost 300,000 yuan on the market but was reported at 4 million yuan in bidding. They have been retroactively investigating for over a decade, apprehending numerous individuals, yet this has not been widely reported in the news.”
The notice also highlighted violations by agencies charging unauthorized fees, failing to return deposits on time, suppliers providing false testing reports, certification documents, contract performances, declarations for small and medium-sized enterprises, bid documents being tampered with or suspiciously consistent, deposits being transferred from the same account, and entrusting the same entity or individual with the preparation of bid documents. It explicitly states that cases where suppliers collude in bidding and are suspected of committing crimes will be transferred to public security agencies for criminal liability investigation.
Qin Song (pen name), familiar with the bidding process, disclosed to reporters that bid-rigging and collusion have long been prevalent in government procurement, with regulatory bodies not entirely unaware but rather overlooking these practices for an extended period. He commented, “Corruption at the grassroots level is rampant. Almost everyone is corrupt, as government procurement positions are lucrative and often favor insiders. Sometimes, even before a project is open for bidding, they share confidential information with you, allowing you to align your bid price perfectly with the government’s budget.”
Qin Song emphasized that behind the bidding process lies control by certain corrupt officials. He stated, “The same group of people are involved in drafting bid proposals, handling deposits, and setting prices. This is the darkest aspect of government procurement. The recent investigations are due to financial constraints; it’s all about following the money trail.”
The notice mandates that relevant departments submit a report on the three-year rectification by December 31 and utilize artificial intelligence to identify discriminatory clauses and bid-rigging suspicions. Qin Song expressed skepticism, noting that while technology can uncover visible traces, it is challenging to penetrate the power arrangements behind the scenes.
Previously released data from the Ministry of Finance revealed that the nationwide government procurement scale in 2024 amounted to 3,375.43 billion yuan. Government procurement funds flow into various sectors such as engineering, equipment, information technology, environmental protection, healthcare, education, sanitation, etc. These fiscal resources pass through government departments, agencies, and suppliers, establishing a convoluted network of local power, corporate relationships, and project interests.
Chinese scholar Huang Ying (pen name) informed reporters that as the Chinese Communist Party advocates for building a unified national market, acknowledgments of regional protection, falsified materials, and bid-rigging within government procurement are contradictory. Huang stated, “This underscores that the so-called unified market is merely rhetoric when it comes to government procurement. Regional finances, local officials’ authority, and connections with local enterprises and shadow networks have long been intertwined, making it extremely challenging for companies from other regions to compete fairly. The Party’s current crackdown on the four categories of issues primarily addresses the symptoms of procurement irregularities, but ultimately grapples with systemic problems. This system has become deeply ingrained and hard to reform.”
Huang Ying believes the documents from the three departments expose the underlying malaise within the Chinese government procurement system. She emphasized that while the “rectification” efforts may clear specific flagged projects, dismantling the corrupt network of power, money, and relationships within the Chinese Communist Party system is a much more formidable task.