On June 4, the National Development and Reform Commission (NDRC) issued a directive regarding government's project bidding practice.  Overall, the directive is to make sure that project biddings are transparent, fair, unbiased, and non-discriminative.  However, regarding government procurement, it does clearly state that domestic products should be favored.

Regarding the policy of favoring domestic products, the New York Times reported today as

"Beijing has banned all local, provincial and national government agencies from buying imported goods except in cases where no local substitute exists.

The rule, issued as part of the country’s economic stimulus plan and enforcing a seldom honored Chinese law from 2003 favoring domestic suppliers, exploits China’s failure so far to sign a global agreement barring protectionism in government procurement."

Meanwhile, ChinaView, China's official English website of Xinhua, posted an article to defend the government's guideline. 

"Critics are accusing China of practicing protectionism in a directive ordering a stop to discrimination against homemade products in government procurement from its 4-trillion-yuan (585 billion U.S. dollars) stimulus package.

However, on closer inspection, the 'Buy China' policy, as it was dubbed in foreign media reports, does not create, but eliminates, discrimination.

To detect trade protectionism in the directive is either misinterpretation or overreaction.

The fact is that the directive from the national economic planning agency, the National Development and Reform Commission (NDRC), is made to avoid discrimination against domestically made equipment."

"It is also misleading to call the directive a "Buy China" policy in parallel to the "Buy American" provisions in the United States' 787-billion-U.S. dollar economic stimulus bill, as the directive is in nature a government notice, not a law."

Regarding government's procurement that favors domestic products, ChinaView's argument is that "China has not signed the WTO Agreement on Government Procurement under the framework of the World Trade Organization, like many other developing nations".  Therefore, China's practice should not be bound by the WTO agreement. 

On the U.S. side, the very fact of China's not joining the WTO agreement is criticized by New York Times:

"Under the rules of the World Trade Organization, China is prohibited from discriminating by nationality in the purchasing of goods — except for government procurement, which is covered by a separate W.T.O. agreement that virtually all industrialized nations have signed. When China joined the W.T.O. in November 2001, and gained full access for its exports to foreign markets, it pledged to join the agreement on government procurement “as soon as possible.”

Subsequent talks in Geneva produced no progress, leaving China, with its enormous state sector, free to favor domestic suppliers in government contracting."

On the China side, ChinaView points out that

"Government procurement is not about foreign trade, but about how to best spend the taxpayers' money, so guiding policies cannot constitute protectionism.

In evaluating China's move to support domestically made products, it should be remembered that giving priority to home-made products is actually practiced in many countries.

Even the United States, which has signed the WTO government procurement treaty, has laws and regulations stipulating preference for domestically made products, such as the Buy American Act, which restricts the purchase of supplies that are not domestic end products for use within the United States.

Interestingly, Lenovo computers are excluded from the U.S. government procurement list for "security" reasons, although such computers are little different from IBM products before Lenovo took over the personal computer unit from the U.S. firm in 2004, says Zhang Yansheng, director of NDRC's Institute of Foreign Trade. "

To further prove China's protectionism, the New York Times also cites the China-U.S. trade as additional evidence:

"China’s exports to the United States fell only 12.1 percent in the first four months of this year, compared with the same period last year.

Over the same interval, American exports to China dropped 17.2 percent.

Yet the American trade deficit paradoxically narrowed to $67 billion, from $75 billion, for these periods. That is because the trade is so lopsided that a shrinkage of overall trade results in a smaller deficit even when American exports drop faster.

The United States imports more than $4 worth of goods from China for every $1 of goods that it exports to China."

This seems cherry-picking somehow.  As can be seen from the following chart, China's import has increased faster than export for the last several months, even though import is still lower than export.

To make things worse, the United States and European Union filed complaints with the World Trade Organization today, accusing China of unfair trade practices and saying the Chinese government was restricting exports of raw materials to give manufacturers in that country a competitive advantage.

Yesterday, China announced that starting from July 1, the Customs Tariff Commission of the State Council will eliminate the current 3% export tariffs for 31 items including wheat, rice, soybeans, vitriol, and steel wire;  cancel special export tariffs on 27 chemical fertilizers and fertilizer raw materials; reduce export duties for 29 items including molybdenum, tungsten and indium.  

For this the New York Time attributes it as "a possible effort to blunt the trade complaints".

Someone said that every country ridicules other countries and they are all right.  It seems very applicable here.