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Accounting body benefits from helping China
By Xin Zhiming (China Daily)
Updated: 2008-10-13 18:43
Many people may say an accountant works simply by adding and subtracting figures. But is it really as simple as it looks? For those with at least some knowledge of China's past three decades of economic reforms, the answer is definitely "No". China's successful transition from a rigid, centrally planned economy to a market-oriented one has been accurately summed up as a process of "reform and opening up". But such a generalization may ignore some basic and crucial, but less obvious elements of the economy, such as accounting. An inherent part of opening up is more engagement with international investors and traders and the parties involved need to find a common language that is known to them all. English is the obvious choice and that's why China has become the country with the largest number of English learners. But foreign investors and traders may need more than a common language. "International investors were unable to understand Chinese companies' financial sheets in the planned economy period," says Liu Yuting, head of the accounting section of the Ministry of Finance. China had adopted accounting standards that originated in the former Soviet Union but were tailored to China's economic realities. They were different from general principles Western accountants abided by. Cross-border communication and doing business, therefore, became difficult not only because of political barriers, but because enterprises across the border spoke different "corporate languages". From the early 1980s, right after China started its reform and opening-up drive, Chinese accounting researchers had begun to introduce Western accounting standards and China established formal corporate accounting standards in 1992. The establishment of the country's stock market in early 1990s made it more necessary for the accounting standards to be updated and accepted by all enterprises. In October 1993, the National People's Congress passed the "CPA Law", which came into effect in 1994. It mandated that China adopt a completely new accounting system and ended the old planned economy accounting practice. Standard accounting rules promote the long-term sustainable growth of enterprises, help standardize capital market rules and facilitate auditing, thus becoming part of the financial infrastructure that "underpins and drives China's extraordinary economic success", says Richard Aitken Davies, president of UK-based Association of Chartered Certified Accountants (ACCA). More recently, Liu and his team at the ministry of Finance have been endeavoring since 2002 to further update China's accountancy standards to get them in line with international ones. On the other front, international accounting bodies have entered China to help it get in line with globally accepted accounting principles and to train professionals, with the ACCA playing a leading role. ACCA, the largest and fastest-growing global professional accountancy body in the world, with over 320,000 members and students in 170 countries, entered the mainland in 1988, ten years after China started its opening-up drive. Allen Blewitt, former chief executive of ACCA, who passed the mantle to Helen Brand in September, had come to China even earlier and his impressions were fresh and unique. Blewitt first visited China in 1977 when the country had just emerged from the "cultural revolution" (1966-76) and was looking for a path that could bring the nation out of chaos and towards economic prosperity. To his surprise, he says ordinary Chinese had shown an unbending spirit, which later proved to be the underpinning for China's rise as a global economic powerhouse. "It was (in a people's commune) in Hunan that I met a number of young Chinese students at a sports stadium, where primary school children were being assessed for their athletic abilities," says Blewitt, who was then on a study tour of young Australians. At that time, athletics were not as common as today as the country was still bogged down in the political uncertainties even though the "cultural revolution" had come to an end. He asked their teacher why they could be so concentrated on athletics and the teacher said: "One day, China will be readmitted to the Olympic movement". The philosophical sports teacher was right. Thirty-one years later, Beijing successfully hosted the Olympic Games. Hungry for accountants "The one indelible memory of the 1977 visit remains; everywhere we went Chinese citizens were working steadily and unceasingly in factories, schools and on the communes," he says. "There was a great faith that China was emerging." (For more biz stories, please visit Industries)
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