China's Public Procurement Regime — Comparative and Theoretic Insights

Abstract

Bid rigging conspiracies have long been recognized as significantly inflating public expenditures. Anecdotal evidence suggesting bid rigging offences and a general dissatisfaction about procurement prices and the contracted quality in China is taken as an indication of a lack of competition in public procurement tenders. Because procuring entities are unable to monitor industrial markets effectively, it is submitted that well designed public procurement regimes can help to prevent bid rigging conspiracies. Since structural market determinants are largely beyond reach of public procurement laws, auction theory is used to address cartel formation and cartel stability. Applying this theory to the Chinese public procurement regime identifies concrete actions for procurement entities to undermine cartel formation and stability. The insights gained are compared to the EU public procurement regime in order to examine in how far other legislators have chosen different solutions. It is found that the Chinese legal regime does facilitate both the formation and stabilization of bid rigging cartels and that the European public procurement regime is also subject to criticism in some respects.