The EU executive decided that none of the bids for the €5 million contract were up to scratch and cancelled the tender process, which began in March 2009.
EU and industry sources say it is not clear whether the programme is dead or has simply been shelved. However, consortia bidding for the contract have been told that no bids met the requirements set out in the tender and there is no timeframe for launching a new tender process.
The European Commission has been reviewing bids since April and was originally due to award the contract by September.
As recently as last week (28 October), Franz Jessen, who heads up the EU executive's China office, said he hoped to see progress on the SME Centre by the end of the year.
Tensions between EU and national interests
The new office was to complement existing European business support initiatives and services in China, and the EU was also anxious to avoid "unfair competition with existing European providers of comparable services".
Several European governments have opened offices in Beijing in recent years as part of national efforts to grab a slice of the Chinese market for their own companies.
Some EU member states were uneasy about the prospect of an EU centre duplicating the work of national enterprise agencies, which to some extent compete with one another for business.
A range of private law firms and consultancies are already offering professional services for companies trying to crack China, although these are often viewed by SMEs as an expensive element of opening subsidiaries in Chinese cities.
In addition, the EU-China Management Exchange Training Programme (METP) trains management-level executives in Chinese language, culture and business practices. The EU has recently extended the METP's funding to 2011 and applications for its next intake close in January 2010.
Staff recruitment process already in train
A number of high-profile consortia had bid to operate the SME centre, with two firms advertising during the summer for personnel to staff the centre.
Eurochambres already runs the EU Business and Technology Centre in India. The Indian office is an €8.2 million five-year project, 80% funded by the EU, which supports market access for European companies. It opened its doors in 2008.
The SME Centre planned for Beijing was designed to provide a similar service for companies entering the Chinese market. According to the tender, it would also have provided "network activities and training" and "raised the visibility of the Commission's support efforts" for businesses and investors.
Tender criteria 'not met'
All consortia vying for the contract have now received letters from the EU executive's delegation to China and Mongolia informing them that the tender has been cancelled as no worthwhile offer was received.
The SME Centre was to be worth €5 million, although additional funding of €4 million was also available in the event that the project was expanded.
Bidders were required to have an average annual turnover in excess of €1,000,000 and a staff of at least ten. Value for money was listed as the main criteria for awarding the contract.
The cost and stringent conditions attached to applying for EU projects is often cited as a barrier to SMEs wishing to access Community funds. The low success rate is also a disincentive. In this case, all those who began the tender process in March were unsuccessful.