"Buy Chinese" policy could handicap foreign wind turbine makers

A controversial "Buy Chinese" policy could leave overseas manufacturers of wind turbines and other renewable energy technologies locked out of the bidding for new low-carbon projects undertaken as part of China's $586bn (£361bn) economic stimulus package.

The recently released edict states that "government investment projects should buy domestically made products unless [they] cannot be obtained in reasonable commercial conditions in China."

As a result, developers of state-backed stimulus projects would have to seek permission from the government before buying foreign goods and services.

The mandate follows earlier claims by European business groups that foreign wind turbine suppliers, such as Vestas Wind Systems of Denmark, US-based GE Energy, Spain's Gamesa and Indian firm Suzlon Energy, were spurned in favour of Chinese companies when bidding for 25 wind energy projects worth more than $7bn.

"It seems the central government has decided that this must be awarded to Chinese manufacturers and not foreigners who have invested big in China," Joerg Wuttke, president of the European Union Chamber of Commerce in China, told the Financial Times last month.

Wuttke suggested that Chinese companies had an unfair advantage under the bidding criteria, which focused solely on the turbine unit price while excluding factors such as life cycle cost and rates of return.

The foreign firms did not make it to the second round of bidding for the projects, which fall under China's financial stimulus plan. The funding package was set up last year to offset the impact of the global financial downturn.

Overseas turbine companies have made substantial investments in China to comply with an earlier government stipulation requiring at least 70 per cent of components to be sourced domestically in order to be eligible for use in Chinese wind energy projects.

The new "Buy Chinese" policy does not make clear whether or not China-based operations of foreign companies would be considered domestic products.

China has more than 70 wind turbine makers, which supply most of the equipment used in domestic wind power projects. In 2008, foreign companies provided only 24 per cent of newly installed capacity, according to figures from the Chinese Wind Energy Association.