The use of imported goods requires official permission, according to an order issued by China’s main planning agency and eight other government bodies.

The order is considered as a move that could strain ties with trading partners after Beijing criticized Washington’s “Buy American” stimulus provisions.

Even before the order, business groups, like the wind turbine makers, which complain they have been shut out of bidding on a $5 billion stimulus-financed power project, were worried that foreign companies might be excluded from construction and other projects financed by Beijing’s 4 trillion yuan ($586 billion) stimulus.

“Government investment projects should buy domestically made products unless products or services cannot be obtained in reasonable commercial conditions in China,” says the order, dated June 1 and reported this week by state media. “Projects that really need to buy imports should be approved by the relevant government departments before purchasing activity starts.”

Beijing’s stimulus is aimed at insulating China from the global slump by boosting domestic demand through higher spending on construction of highways and other public works.

The communist government promised in February to treat foreign and domestic goods equally in stimulus spending and has appealed to other governments to support free trade and avoid protectionism.

China criticized Washington for a provision that would favor U.S. suppliers of steel, iron and manufactured goods in projects financed by its stimulus. China’s main state news agency labeled such conditions “poison” to efforts to solve the global economic crisis. There was no indication the latest order was a response to Washington’s stimulus provisions.

China’s World Trade Organization commitments require it to treat foreign and domestic goods equally in commercial trade. But Beijing has not signed a WTO treaty that extends such requirements to government procurement, which might limit options for challenging Beijing’s “Buy China” order.

Beijing has imposed similar requirements on government projects such as China’s giant Three Gorges Dam to favor domestic suppliers of equipment and services.

Both the American and European Union chambers of commerce appealed to Beijing to make stimulus spending decisions on economic grounds and to avoid protectionism.

Source : Konaxis