Zhongke Haixun barred from navy procurement for a year over bid-rigging

Zhongke Haixun, a Shenzhen-listed maker of underwater sonar and specialised electronics, has been barred for one year from navy goods, works and services procurement after military authorities found it engaged in bid-rigging.

The penalty, posted on the military procurement website, closes off a core customer segment and raises questions about how far the ban reaches into businesses linked to its former legal representative. It also highlights the compliance risks facing smaller defence suppliers as procurement rules tighten.

The ban follows a military-wide inspection campaign against bid-rigging and other violations in weapons and equipment procurement. Zhongke Haixun was found to have rigged bids in a procurement project for an assessment system.

The notice states that companies controlled or managed by legal representative Cai Huizhi are also barred during the one-year period. That wording has drawn attention to a gap between the military's records and the company's current registration.

Legal representative changed before the ban

According to corporate records database Tianyancha, Beijing Zhongke Haixun Digital Technology Co Ltd's legal representative is now Zhang Qiusheng, with Cai Huizhi listed as a director.

A company disclosure dated May 8, 2025 confirmed the change from Cai to Zhang and said the business registration update had been completed.

The mismatch between the "Cai Huizhi" named in the penalty decision and the "Zhang Qiusheng" on the register does not exempt the company from liability, however. Military procurement rules hold the person in charge at the time of the violation accountable, closing off any route to escape responsibility through a later change of legal representative.

That means entities controlled or managed by Cai, including related companies outside the listed group, are also covered by the one-year ban.

Pressure on smaller defence suppliers

The case reflects the strain on smaller suppliers in the military electronics supply chain after a long industry downturn. Some have resorted to irregular tactics to hold on to orders.

Zhongke Haixun focuses on sonar and radar signal processing, underwater acoustic communications and simulation systems. Its customers are concentrated among specific military branches and defence research institutes, products are highly customised, and contracts are large and scheduled well in advance.

In the past two years, slower military procurement tendering, pricing reforms and longer delivery cycles have squeezed suppliers' cash flow and order books.

Some companies have used affiliated shell companies to pad bids or reached price understandings with rival bidders to form exclusionary alliances in specific procurements.

The current military tendering system uses big-data comparison, document fingerprinting and checks on corporate relationships to flag overlapping IP addresses, near-identical bids and common sources of bid deposits. Once bid-rigging is established, the result is not guaranteed profit but a damaging market ban.

Hit to revenue

For a company that relies heavily on specialised defence revenue, a one-year ban on navy goods, works and services procurement is a severe blow.

The navy is the core end-user of underwater acoustic equipment and sonar systems, and its orders underpin most of Zhongke Haixun's main business. Although the penalty is limited to goods, works and services procurement, defence procurement uses strict supplier performance reviews and negative credit lists.

A year without access to public tenders and new project bids for the relevant branch means a sharp fall in revenue and a gap in orders over the next four quarters.

The bigger risk is lasting damage to customer trust. In a sector that demands absolute reliability, a supplier labelled as having rigged bids will lose qualification points in upgrade work, advanced research and cross-branch supply. Prime contractors are likely to cut such suppliers from subcontracting to protect themselves.

A costly year

The legal representative change recorded by Tianyancha shows Zhongke Haixun tried to put a corporate governance buffer in place. Against the military's penetrating compliance review, that late separation looks ineffective.

With the ban in force, the company will spend a year cut off from a key market — a costly price for past misconduct.

The test now is whether it can survive a year without core navy orders and convince military procurement regulators and investors that its internal compliance has been rebuilt.