2022 Digital Transformation of Procurement of Chinese Governments and SOEsSource:iResearch
June 14,20224:55 PMOverview
According to different digitalization levels, government and SOE procurement have three stages, which are information, e-commerce and platform stages. Currently, most governments and SOEs are upgrading from the e-commerce stage to the platform stage. The main factors hindering digital upgrades of governments and SOEs are different digital maturity degrees, uneven technical levels and diversified management concepts.
E-market systems and e-bidding systems are the two forms of government procurement. The e-market systems are usually used for goods, projects and services below the public bidding amount standard. The e-bidding systems are usually used for goods, projects and services above the public bidding amount standard. These two systems can be built separately in a local deployment method, or they can be integrated based on cloud architecture to form an integrated procurement platform for regional coordination, namely cloud platforms for government procurement.
Besides self-built malls, SOE procurement is also done through digital procurement platforms and exclusive malls. Digital procurement platforms are built with the support of technical service providers. It can reach both internal information systems and external suppliers through open platforms. Since the development is difficult it is more suitable for large and medium-sized SOEs. The exclusive mall is based on the procurement mall template provided by the B2B e-commerce platforms. SOEs can customize their personnel permissions and approval process. Compared to digital procurement platforms, exclusive malls are more suitable for SMEs since its more flexible but their commodity procurement channels are limited.
Influenced by policies and the Covid-19 pandemic, more Chinese governments and SOEs use online procurement compared to 2020. The transaction scale of government and SOE procurement platforms in China reached around 2.8 trillion yuan in 2021 and is estimated to reach 5.9 trillion yuan in 2025 as local governments are actively building regionally integrated procurement platforms and SOEs attach more importance to online procurement.
With procurement platforms' advantages in saving money and increasing efficiency, the main body of government and SOE procurement will expand, and industrial products will be a key procurement category. Government and SOE procurement platforms are increasingly mobile and intelligent, extending to enrich the procurement supply chain. They cooperate with third parties to form a service ecosystem to serve government and SOE customers.
Product Forms in SOE Procurement Digitalization
In the informationization period, there was no mature professional procurement platform for businesses. SOEs completed procurement through the internal ERP systems and third-party supply platforms, realizing the underlying data sharing. In the e-commerce period, there were two types of SOE procurement platforms, which were self-built procurement platforms, such as the self-built internal e-procurement system of Sinopec, and exclusive procurement mall, which only needs to provide account permissions for SOEs to achieve exclusive mall procurement, lowering the threshold for SMEs to use the procurement platform. In the platform period, suppliers in the market increased. Meanwhile, SOEs' demand for procurement supply chain extends to technology and logistics, resulting in the emergence of comprehensive platforms for full-link procurement solutions. SOE procurement platforms now mainly cover non-productive materials. The raw materials in large demand are mainly purchased through offline bidding.
Status Quo of Government and SOE Procurement Platforms
The numbers of buyers and suppliers on government procurement platforms are higher than that on SOE procurement platforms. Zhengcaiyun has 900,000 suppliers and Gongcaiyun has 360,000 suppliers, more than the suppliers on SOE procurement platforms. The main reason is that the threshold for government procurement platforms has been lowered since 2017, providing SMEs more development opportunities. Meanwhile, government procurement covers rich categories, including protective equipment, vaccines, teaching and research products, etc. Judging from the number of app downloads, the penetration of SOE procurement platforms is higher on mobile devices. Among government procurement platforms, Zhengcaiyun is the only one with a mobile client.
Transaction Scale and Forecast of Procurement Platforms for Governments and SOEs
The pandemic brings opportunities for the development of the online procurement industry. The government procurement scale in 2020 is much higher than in 2019. Many provinces have accelerated the construction of regionally integrated procurement cloud platforms. The online procurement policies of provinces have been issued, and the construction of regional integration platforms has been gradually improved, jointly promoting the increase in government online procurement amount. The transaction scale of government and SOE procurement platforms in China reached 2.8 trillion yuan in 2021. It is expected that the proportion of government procurement is going to increase. Large SOEs have been speeding up procurement platform construction in recent years, injecting vitality into online transactions. Driven by multiple factors, Government and SOE platform will maintain a high growth rate and the transaction size is expected to reach 5.9 trillion yuan in procurement 2025.
Industry Chain and Map
In the digital upgrade of procurement, the government can use the technical support of traditional software service providers to assist in building a procurement platform. Or, they can also connect with platform-based service providers and specific-purpose service providers. As a third party, platform service providers are responsible for platform operations but do not directly provide products. Service providers for specific areas are mostly embedded in the procurement platform in the form of API interfaces. Since government procurement e-stores are not operating e-commerce platforms, more neutral platform-based service providers are more compliant. SOE procurement can be done by platforms built with the help of digital procurement solution providers, exclusive malls provided by e-commerce platforms or self-built procurement platforms. More and more government and SOE procurement will be done on mobile devices instead of web pages or PCs, making it faster and easier.
Trend 1: Increase in Penetration
Online procurement is gaining more and more attention from governments and SOEs since the outbreak of Covid-19. Governments and large SOEs will play an exemplary role, and their procurement digital upgrade will be advanced. In terms of procurement targets, due to policy orientation and restricted offline procurement activities, industrial products will become a key growth area among the commodity categories purchased by SOEs. Services on government and SOE procurement platforms will be more flexible. Self-operating procurement platform service providers can access platforms as good or service providers. Besides, government and enterprise procurement platforms will integrate other services related to procurement and services on platforms to form a complete procurement ecology.
Trend 2: Regional Integration
The government and SOE procurement platforms can solve the problems of regional information asymmetry and uncertainty, achieving data collaboration within provinces. With the accelerated of government and SOE procurement from e-commerce to platforms, the procurement information systems, supervision systems and service systems will be further integrated. In the future, government procurement will develop from provincial networks to regional networks, realizing cross-region resource sharing and transaction coordination. SOE procurement will cover the group from top to bottom, and break local barriers and regional patterns. In this way, markets can spontaneously regulate prices through competition, improve resource allocation efficiency, and facilitate digital governance and digital supervision of SOEs. Regionally integrated trading platforms can eliminate various barriers caused by information asymmetry and regional differences to build a unified, open, competitive, and orderly market system. The regionally integrated government and SOE procurement platforms can promote the construction of a procurement credit system, and assist in market regulation and business environment optimization.
Table of Contents of the Full Report
1 Definition: Basic Characteristics of Government and SOE Procurement 1.1 Definition of Government and SOE Procurement 1.2 Main Targets of Government and SOE Procurement 1.3 Main Methods of Government and SOE Procurement: Offline Procurement 1.4 Main Methods of Government and SOE Procurement: Online Procurement 1.5 Features of Government and SOE Procurement
2 Development Overview: Status Quo of Government and SOE Procurement Digitalization 2.1 Development of Government and SOE Procurement Digitalization 2.2 Product Forms of Government Procurement Digitalization 2.3 Product Forms of SOE Procurement Digitalization 2.4 Drivers of Government and SOE Procurement Digitalization: Policy Support 2.5 Drivers of Government and SOE Procurement Digitalization: External Environment 2.6 Drivers of Government and SOE Procurement Digitalization: Internal Appeal 2.7 Influencing Factors of Government and SOE Procurement Digitalization 2.8 Major Bottlenecks of Government and SOE Procurement Digitalization
3 Value and Application of Government and SOE Procurement Platforms 3.1 Government Procurement Platform: E-Mall 3.2 Government Procurement Platform: Cloud Platform (1) 3.3 Government Procurement Platform: Cloud Platform (2) 3.4 SOE Procurement Platforms: Digital Procurement Platform 3.5 SOE Procurement Platforms: Exclusive Procurement Mall 3.6 Value of Government and SOE Procurement Platforms： Regulated Transaction 3.7 Value of Government and SOE Procurement Platforms: Scientific Regulation 3.8 Value of Government and SOE Procurement Platforms: Inclusive Service 3.9 Selection of Government and SOE Procurement platforms
3.10 Scenarios of Government and SOE Procurement Platforms 3.11 Status Quo of Government and SOE Procurement Platforms 3.12 Transaction Scale and Forecast of Government and SOE Procurement Platforms
4 Case Study: service providers of Government and SOE procurement platforms 4.1 Industry Chain and Industry Map 4.2 Zhengcaiyun 4.3 B.JD.COM 4.4 YonBIP 4.5 WWW.EPEC.COM 4.6 SEARUN
5 Trend: Development Direction of Government and SOE Procurement Platforms 5.1 Trend 1: Increasing Penetration 5.2 Trend 2: Regional Integration 5.3 Trend 3: Aggregation Ecology 5.4 Trend 4: Mobility and Intelligence
The main procurement targets of government and SOE procurement are goods, services, and projects. Government procurement has characteristics such as credit procurement, high procurement stickiness and fairness and it is strongly affected by policies.
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