Geng Jun, President of Shaanxi Ruiying Biomedical Technology Co. Ltd. has spent over 20 years in the pharmaceutical industry. He said volume-based procurement is no longer new in healthcare—it's now a fixture. The model works by aggregating demand from hospitals and negotiating directly with drug suppliers to lower prices through scale.

Geng said protectionism used to be a common feature of drug procurement. Local healthcare authorities had leeway to adjust their essential drug lists, and hospitals often favored local pharmaceutical firms in their purchasing decisions. In China, the government-run medical insurance programs at the provincial level provide full reimbursement for some drugs on the lists and partial reimbursement for others.

"That kind of local tilt is largely gone now," he said. Today, a single province can take the lead in initiating volume-based procurement for a specific drug or medical device, and other provinces with similar needs can opt in. The result is a cross-regional procurement bloc where demand and supply are coordinated across multiple jurisdictions. The push to break down regional market barriers is already showing results.

Since the National Healthcare Security Administration launched its pilot program for volume-based procurement in November 2018, China has completed 10 rounds of nationally organized drug procurement, consisting of 435 types of drugs. A bulk drug procurement landscape is taking shape, with nationally organized and interprovincial joint initiatives forming the core, while provincial-level purchasing plays a supporting role.

The volume-based procurement, featuring open, competitive bidding to select the most capable suppliers, ensures that medicines and medical devices with the best cost-performance ratio quickly gain market share. It also reduces the burden on manufacturers—cutting down on redundant bidding processes and creating a more transparent business environment. Geng saw this mechanism as a concrete example of what China's unified national market is meant to achieve.

China's vision for such a market goes far beyond the healthcare sector. The country is racing ahead with its plan to build a unified national market—a move designed to create a highly efficient, standardized, fair and fully open mega-market that matches the scale and ambition of the Chinese economy.

At the heart of this national project are efforts in six areas. They consist of unifying the rules and standards that underpin markets, integrating infrastructure across regions, building a national-level market for factors of production (business inputs), aligning the trade of goods and services, and enforcing consistent market oversight—all the while dismantling local protectionism, according to the National Development and Reform Commission (NDRC).

From scale to strength 

When an economy is fragmented by various administrative barriers and vested interests, its true market potential remains under-tapped—regardless of its overall size. In such cases, businesses face barriers that limit their ability to scale, operate efficiently across regions, or compete on a level playing field. That's why a large economy doesn't automatically equal a unified, super-sized market, Wang Xiaosong, a research fellow at Renmin University of China's National Academy of Development and Strategy, told Beijing Review.

With a population of over 1.4 billion, the world's largest middle-income group of more than 400 million people, more than 180 million business entities, and the most extensive networks of high-speed rail, expressways and world-class ports, China stands as a promising mega-market. Yet for a product or service to move smoothly across this vast market is far from effortless.

For years, local protectionism and market fragmentation have acted like invisible walls, blocking the smooth flow of goods and factors of production across regions.

These barriers take many forms. As Geng once experienced, in some areas, the investment bidding processes are tilted in favor of local firms or state-owned enterprises. Some local governments require companies to register within their jurisdiction as a precondition for participation, creating hurdles for businesses looking to expand or relocate. Others impose local standards that conflict with national norms—such as varying definitions for truck overloading—which complicate interregional transport and logistics.

Apart from the issues of unfair competition and excessive government intervention, the physical and institutional infrastructure needed for a unified market remains incomplete, Wang Yiming, Vice Chairman of the China Center for International Economic Exchanges, wrote in an article published last year in academic journal China Industrial Economics.

Many public resource transactions that meet national standards have yet to be incorporated into unified platforms. Meanwhile, the rules governing factor markets, where factors of production are traded, are still uneven: The capital market's basic systems need improvement and an integrated national market for technology and data has yet to take shape, he said.

In today's world, markets are the scarcest resource. If the aim is to fully unleash the potential of China's huge market, turning its vast economic scale into real market strength, then building a unified national market is not optional—it's imperative.

In full swing 

In recent years, China has placed growing emphasis on building a unified national market. Since the release of a guideline on accelerating the establishment of a unified domestic market in April 2022, the concept has gained consistent prominence in key political and economic meetings.

Over the past three years, a multitude of reform measures have been rolled out, translating top-level directives into on-the-ground changes across sectors and regions.

On October 15, 2024, the interprovincial electricity spot market officially went into operation—constituting a key milestone in the country's effort to build a unified electricity market system. The spot market allows power producers and users to engage in transactions based on real-time supply, demand and price shifts, and enables provincial-level regions to balance surpluses and shortages more efficiently. As a core pillar of the unified national electricity market—and, by extension, the broader unified national market—it plays a critical role in optimizing the allocation of electricity resources across regions.

Last November, an action plan for reducing overall logistics costs was released, setting a clear target that by 2027, the ratio of total logistics costs to GDP should fall to around 13.5 percent. Vice Minister of Transport Li Yang announced that the country would accelerate the development of a unified national transport market. As part of this effort, a dedicated campaign to cut logistical costs is underway, with projections showing a potential reduction of 300 billion yuan ($41.7 billion) in 2025 alone.

Since the beginning of this year, a wave of targeted, results-oriented measures has been implemented, injecting fresh momentum into the construction of a unified national market.

The NDRC, together with other related departments, issued a roadmap for implementing the unified national market strategy in January. It outlines clear directives across three dimensions—what is required, what is prohibited and what is encouraged.

Later in the month, the Measures for the Implementation of the Fair Competition Review Regulations were released, taking effect on April 20. The measures aim to ensure that administrative decisions—such as subsidies, procurement policies or market access criteria—do not create unfair advantages or invisible barriers. As a core mechanism supporting the unified national market, the fair competition review is crucial for maintaining a level playing field.

In March, the central authorities introduced a guideline on improving the social credit system. The document emphasizes deep integration of the system into all aspects of social and economic development. It aims to provide support for building a unified national market while maintaining a fair and just market environment, as well as promoting high-quality development.

According to the Chengdu Municipal Development and Reform Commission, Chengdu, capital of the southwestern province of Sichuan, and Chongqing, a municipality neighboring Sichuan, are pioneering a reform to replace traditional proof-of-compliance documents with specialized credit reports. The two cities have already signed China's first regional mutual recognition agreement under this model. A total of 9,845 credit reports have been used in place of 254,500 certificates proving no legal or regulatory violations. This has greatly boosted operational efficiency for local businesses. 

On April 16, the 2025 edition of the national market access negative list was officially released, reducing the number of listed items from 117 in the 2022 version to 106. The list specifies the industries, sectors and activities within China that are either prohibited or require government approval for investment and operation. Outside this list, all types of business entities—domestic and foreign—are free to enter the market on equal legal footing.

Major changes in the renewed list include lowering market entry thresholds by scrapping certain national-level restrictions, such as replacing licensing with a filing system for seal engraving services, and streamlining access in areas like TV production and new telecom services. It also eliminates outdated local-level measures, including regional controls on shipbuilding design and alcohol production, in favor of nationally unified standards.

Across the country, local governments are rolling out initiatives to accelerate the development of a unified national market. In transportation and logistics, the Yangtze River Delta, one of China's most economically developed regions, which contributes about 25 percent of China's total GDP, is making major strides in infrastructure connectivity. On the market access front, Guangdong Province, an economic powerhouse that accounts for roughly 10 percent of the country's GDP, is continuing to refine its business environment by expanding the One-Stop Online Government Services model. To facilitate data circulation, Beijing is working to build a national-level integrated data market. Efforts include standardizing public data authorization and operation, opening up 18,000 high-quality datasets to the public, and launching over 70 pilot scenarios in areas including autonomous vehicles and advanced medical devices.

Leveling the playing field 

China is navigating a complex landscape marked by both external headwinds and internal challenges. Rising unilateralism and protectionism worldwide are reshaping trade dynamics, while at home, insufficient demand is emerging as a key restraint on economic momentum, Wang Xiaosong said.

Ultimately, building a unified national market is not just a response to today's pressures. It's a long-term move to sharpen the efficiency of China's socialist market economy and ignite new energy within market players across the country, he added.

Private enterprises are vital market players in China. Yet they've faced a host of obstacles. "Among the many factors that hinder private enterprises from competing on equal footing, the underdevelopment of a unified national market stands out as both typical and deeply consequential," Wu Sa, Deputy Director of the Economic Research Institute at the Academy of Macroeconomic Research of the NDRC, told Beijing Review.

Local protectionist practices, he noted, have not only crowded out private firms in other regions but also increased their cost of expanding across provincial borders.

"Addressing the mismatches, gaps and inconsistencies within the market is crucial to enabling private enterprises to compete on fair and equal terms," he said.

Still, for many businesses, the creation of a unified national market brings both opportunities and challenges. According to Geng, it sets off a "knockout round" of competition. Under the unified market framework, the system relies on fair competition to identify top-performing suppliers. But for those that fail to make the cut, the risk of being pushed out of the market looms large.

"This kind of competition is positive. It drives more efficient production across society," Geng said. "Those with low production standards or outdated processes will simply lose their place. This is market-driven selection, and it pushes productivity forward." BR

(Print Edition: Tearing Down the Invisible Walls)

Copyedited by G.P. Wilson

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