In recent years, the Chinese government has comprehensively reformed its government procurement system, steadily improving market order while aligning with international frameworks such as the WTO’s Agreement on Government Procurement (GPA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Efforts have been made to improve the legal system for government procurement, enhance its rule of law, and promote market access, in order to foster a market-oriented, law-based, and internationalized environment for government procurement.

Against this backdrop, the National Audit Office of China (CNAO), grounded in its role of economic oversight, has been auditing the operations of government procurement across all stages, from budget management, procurement procedures, to fund management and use, ensuring that every fraction of public funds is spent where it is most needed with good value for money.

Government Procurement Law of the People’s Republic of China defines government procurement as the purchasing activities conducted with fiscal funds by government departments, institutions and public organizations at all levels, where goods, construction and services are in the centralized procurement catalogue compiled in accordance with law or the value of the goods, construction or services exceeds the respective prescribed procurement thresholds. Through a series of law-based regulatory initiatives, the Chinese government has facilitated continuous expansion of government procurement scale, improved its legal framework, and realized significant cost savings and policy outcomes.

Implementing government procurement in an expanding scale

Government procurement plays a critical role in the economic development of all countries, and the scale and influence of China’s government procurement are substantial. Serving as a bridge between government and market, government procurement represents an important institutional arrangement in China’s public finance operation and national governance. The Chinese government has piloted the government procurement system in its economic activities since the late 1980s and early 1990s. After a period of exploration, an orderly and transparent government procurement system was gradually established, and the scale of government procurement has continued to expand.

According to World Bank data, government procurement accounts for 10%–15% of global GDP, with this proportion even higher in some developed countries. China’s government procurement scale has also continued to grow. Public data show that the scale of government procurement in China increased from 100.96 billion RMB yuan in 2002 to 3,499.31 billion RMB yuan in 2022, accounting for 9.4% of national fiscal expenditure and 2.9% of GDP in 2022. Government procurement is playing an increasingly important role in China’s economic development.

Implementing government procurement in an orderly and law-based manner

China’s government procurement, evolving from its initial pilot phase to the formal promulgation of the Government Procurement Law of the People’s Republic of China in 2002, entered into a new phase of development under the rule of law. In recent years, China issued an Action Plan for Deepening Reform of the Government Procurement System, proposing a series of measures aimed at accelerating the establishment of a modern government procurement system characterized by clear responsibilities, efficient transaction rules, sound regulatory mechanisms, comprehensive policy functions, well-developed legal framework, and advanced technical support.

To create a market-oriented, law-based international business environment, accelerate the development of a modern industrial system, and promote high-quality economic and social development, the General Office of the State Council of China launched a three-year initiative (2024–2026) nationwide focusing on “improving market order, building regulatory system, and promoting industrial development” in the government procurement sector. To implement Action Plan for Deepening Reform of Government Procurement System, the Ministry of Finance and other relevant departments are revising the Government Procurement Law of the People’s Republic of China, issuing a series of departmental regulations, and establishing a comprehensive legal system for government procurement, covering work mechanisms, operation procedures, as well as principles of management, oversight and adjudication, ensuring law-based governance in China’s government procurement.

Leveraging economies of scale in government procurement to improve the effectiveness of public funds

In recent years, the Chinese government has repeatedly emphasized that the government should tighten its own expenditures and priorities more resources to the people. In the context of government procurement, tightening the expenditures means ensuring procurement activities conducted in a value-based and cost-saving manner through centralized bulk procurement, and ensuring that fiscal funds are used where they are most needed. To this end, China’s government procurement authorities have issued specific regulations requiring the implementation of centralized bulk procurement and procurement through framework agreements among government entities.

For instance, orders for desktops, laptops, printers, photocopiers, and air conditioners are aggregated for centralized procurement to fully leverage economies of scale in government procurement, reduce procurement costs, and maximize the efficiency and value for money of public funds. Public data indicate that the prices of desktop computers purchased through centralized bulk procurement are generally 30% lower than market prices. Meanwhile, procurement administrative authorities have required central departments to conduct procurement through framework agreement for common services such as construction cost consulting and project management, regulating small-value procurement practices, setting price ceilings, and allowing entities to further reduce prices through secondary bidding within the ceiling to maximizing savings.

Unleashing the policy orientation function of government procurement in multiple ways

Article 9 of Government Procurement Law of the People’s Republic of China stipulates that government procurement shall be conducted in such a manner as to facilitate achievement of the goals designed by State policies for economic and social development, including but not limited to environmental protection, assistance to underdeveloped or ethnic minority areas, and support of small and medium-sized enterprises. Public data show that the policy orientation function of government procurement are increasingly prominent, and has effectively promoted economic and social development.

For example, in supporting green development, the Ministry of Finance and the Ministry of Housing and Urban-Rural Development have explicitly required the comprehensive adoption of green buildings standards and purchasing green building materials in government procurement. In 2025, the Ministry of Finance further requested to “optimize government green procurement policies, improve standards and norms for green product procurement, expand the scope and scale of procurement, and guide the increase in green product supply and consumption”. In 2020, the government procurement of energy-saving and water-saving products amounted to 56.66 billion RMB yuan, accounting for 85.7% of nationwide procurement in similar product categories, while the procurement of environmental friendly products reached 81.35 billion RMB yuan, accounting for 85.5% of nationwide procurement in similar product categories.

In supporting small and medium-sized enterprises (SMEs), since 2019, the Chinese government has continuously enhanced policy framework for SMEs through government procurement, and a host of documents have been issued in this regard, including The Guidance on Promoting Fair Competition and Improving Business Environment in Government Procurement, and The Guidance on Further Increasing Government Procurement Support for SMEs. In 2022, the total contracts awarded to SMEs accounted for over 70% of the total government procurement contracts. Furthermore, government entities have actively implemented government procurement policies in supporting poverty alleviation. In 2020, the procurement of agricultural products from poverty-stricken regions reached 9.967 billion RMB yuan, achieving significant social benefits in increasing the incomes of impoverished rural households and facilitating the sales of agricultural products.

II. China’s Audit Institutions Advance Orderly Operation of Government Procurement and Efficient Use of Funds
Audit institutions are key forces for the modernization of China’s system and capacity for governance. In recent years, Chinese audit institutions actively contributed to fostering sound economic development, safeguarding national economic security, exposing risks and potential weaknesses, and advancing the efforts in combating corruption and misconduct. In practice, audit institutions ensured through their work that the mandate and primary role of audit institutions in economic oversight are followed, that the methodology of research-based audit is adhered to, and that auditors’ professional integrity and competence are upheld. This safeguards proper government procurement and the efficient use of funds.

Promoting completeness and accuracy in budget formulation through auditing the compliance of government procurement budget

The government procurement budget serves as the starting point for procurement activities and a key basis for determining procurement scale and fund utilization. The completeness and accuracy of the budget are essential prerequisites for the compliance of procurement activities and the use of funds. Through auditing the completeness of procurement budget formulation, China’s audit institutions promoted comprehensive and accurate preparation of procurement plans and relevant budgets, ensuring that goods, works, and services meeting statutory threshold or included in the centralized procurement catalog are fully incorporated into the budget plans. By auditing the accuracy of budget formulation, audit institutions make sure government entities will better estimate the quantity, specifications, models, and budget amounts of procurement items based on actual needs and market conditions, thereby avoiding over-budgeting or under-budgeting. Through these audits, entities at all levels are better guided to prepare budgets in accordance with laws and regulations, and to conduct procurement activities strictly according to the goods, works, and services specified in the budget plan, thereby enhancing the completeness and accuracy of government procurement budgeting.

Promoting Orderly Operation of government procurement through auditing the lawfulness of procurement process.

The lawfulness of government procurement process is a critical factor ensuring fairness, impartiality, and transparency in procurement activities. “Sunlight is the best disinfectant”. Many illegal or non-compliant issues in government procurement are procedural irregularities or violations. The audit institutions enjoy high independence and are not involved in general government functions such as administrative approval, project management, or fund allocation. This independence ensures audit institutions as key forces for the modernization of China’s system and capacity for governance, and enables auditors to better play their role in anti-corruption activities. Audits of the lawfulness of procurement process ensure that government procurement activities are operated in a law-based manner, in which auditors examine whether procurement decisions, such as open tender, invited tender, inquiry, competitive negotiation, or single-source procurement, are made in accordance with the law; whether the stipulated procedures at each stage are strictly implemented, including commissioning of procurement plans, preparation and announcement of procurement requirements, bidding and bid evaluation, and selection of winning bidders and contract signing; and whether the fairness and transparency of procedures, such as the receipt of bids, bid opening, and bid evaluation, are properly followed. Through revealing any irregular operations by entities or suppliers for illicit gains, audit institutions can effectively fulfil their anti-corruption duties.

Overseeing public spending and promoting practice of frugality through auditing the performance of procurement funds.

The effectiveness of procurement funds is an important aspect in government procurement audits. Chinese audit institutions, focusing on their main responsibility of auditing the authenticity, lawfulness, and effectiveness of public revenue and expenditure, oversee the exercise of power by following the flow of funds and implementation of projects, safeguard public spending, promote practice of frugality among government entities, and ensure the implementation of national policies in the fiscal and economic domain.

By auditing the compliance of government procurement in its use of funds, audit institutions ensure procurement funds are allocated to their intended projects and spent where they are most needed. By auditing the carryover balance of government procurement funds, audit institutions ensure the efficient and timely use of funds. By auditing whether procurement prices are align with market conditions and whether adopted procurement strategies have generated cost reductions, audit institutions further enhance the effectiveness of fiscal fund utilization.

III. Challenges in Auditing Government Procurement and CNAO’s Responses
Currently, government procurement audits conducted by Chinese audit institutions still face some challenges, For instance, the quality and impact of audit findings need to be improved; some audits are not focused; the contradiction between heavy audit tasks and insufficient manpower is prominent; the competence of auditors cannot fully meet the needs of auditing; and the digitalization of audit institutions needs to be further strengthened. Audit institutions should adhere to a problem-oriented approach, implement targeted measures, make every effort to make up for shortcomings, and promote the high-quality development of audit work.

Further focusing on the main responsibility of audit institutions

China’s auditing institutions will continue to fulfill their responsibility of auditing the authenticity, lawfulness, and effectiveness of public revenue and expenditure. In response to the increasingly complex audit matters, audit institutions will further focus on the critical operations of government procurement process and the use of funds. Key priorities will be auditing the completeness and compliance of budget formulation, intensifying performance audits of procurement expenditures, and improving the effectiveness of procurement funds. Based on examining the lawfulness of the government procurement process, efforts will also be made to ensure that public funds are allocated to designated procurement projects to deliver maximum benefit.

Further strengthening auditors’ capacity

As the authority and impact of China's audit institutions continually growing, auditors’ competency is becoming increasingly important. Chinese audit institutions will focus on building a high-quality, professional workforce capable of shouldering responsibilities in the new era, to train more high-quality, multi-skillful audit talents, and fully leverage data-driven approaches in auditing major, critical, and typical issues. This will mainly be a do-and-learn process for the auditors, however when facing complex business tasks, external expertise may also be engaged to address intricate problems more effectively.

CNAO upholds the importance of audit quality and keeps to raise its auditors’ awareness about audit quality and continuously improves its audit practices throughout the entire cycle of audit. Through more pragmatic and efficient work, CNAO will further promote mutual learning with its international counterparts on government procurement audits. By adhering to the right course of economic globalization, embracing openness and inclusiveness, responding to challenges with more concrete actions, we will achieve common development and secure a shared and prosperous future.