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The Development of the Accounting Profession in China

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Mingwei Li

Professor Mark Steadman

ACCT 2020-002

April 27, 2017

The Development of the Accounting Profession in China

     China, the world's most populous country, is the second-largest country in the world by land area. China, an ancient country of over 5, 000 years of history and cultural tradition, has a profound traditional cultural foundation. As for economics, great changes have taken place in China since the introduction of the Reform and Opening Policy in 1978. Before the reform and opening policy, China had a centrally planned economy, which learned from its alley Soviet Union. It did not help develop economies and left deficiencies. With the reform and open-door policy carried out, China has taken on a new look. China has become one of the world's fastest-growing major economies. In 2016, China is the world's second-largest economy by nominal GDP. China is also the world's largest exporter and second-largest importer of goods. With the development of economics, the Chinese accounting system and auditing system also have improved to meet the needs of economic growth. This paper seeks to contribute by further analysis the development of the accounting profession in China from different perspectives.

     To achieve this goal, this paper is divided into three parts. The first part focuses on the Chinese economic history and growth in order to give a whole picture for Chinese economic background information, such as how China built its accounting system foundation and what events have profoundly influenced it. The second part focuses on the how an elite transnational group of large accounting firms (known today as the Big Four) came to influent the market for professional auditing and accounting services in China. The third part analyzes what China can do for further development on its economy and professional accounting system.


     China has a long cultural history, as one of the earliest human civilizations, it developed an accounting system in a very early period. There are four important broad segments in China’s history. Knowing these segments can help understanding the involvement of accounting in the Chinese society. (Gillis 67) “The first is the dynastic period that begins with the Xia Dynasty about 2100 BCE and ends with the Qing Dynasty that fell in 1991”. (Gillis 67) Though accounting system exists early in China, it is only used for government. The economic system in ancient China is agricultural-based economics so except government, most people did not need accounting practice. The emperor’s and imperial family were wealthy enough to require an accounting practice to track their wealth. In this circumstance, the accounting system never achieved a prominent role in the dynastic period. (Gillis 67).

     The formation of the Republic of China in 1912 begins the second period and marks the entry of China into the modern world. (Gillis 67) In this period, public accounting started to become prevalent in China. However, only after a few decades, China entered the third period. After the foundation of the People’s Republic of China in 1949, China changed its economic system into a communism system. Over the following decade, private ownership of business ceased and the public accounting profession disappeared. (Gillis 67) Until then, the public accounting only existed in China for less than forty years. “Under China’s centrally planned economy accounting became a bureaucratic function, heavily guided by Soviet practice.” (Gillis 68) The fourth segment begins with Deng Xiaoping’s decision to end China’s long isolation from the West, marking the remarkable transition of China to a market-based economy, and giving it a major role in the world. (Gillis 67) After China carried out the reform and open-door policy, the Chinese public accounting profession re-emerged in the 1980s.

     The Chinese accounting system also was profoundly influenced by China’s political situation. From these four segmental periods, it is not hard to analyze that when there is a political innovation, there is a change on the accounting system. The ending of feudalism and the establishment of capitalism triggered the emergence of public accounting professions. Considering the plight of Chinese accountants under Mao Zedong’s regime and the extraordinary turnaround of their fortunes after Deng Xiaoping rose to power in the late 1970s, it is conceivable that the state, and the state leaders for that matter, might have had an important influence over the development of the accounting profession in China. (Yee 427) Furthermore, given the vast differences between the ideological principles of the two leaders – with Mao emphasizing the primacy of class struggle, public ownership and central planning, and Deng more concerned with economic development, marketization and mixed-ownership (Ezzamel, Xiao, & Pan, 2007) – “the shift from one regime to the other would have unavoidably changed the political and ideological discourse, impacting on all aspects of Chinese society, including the rise and fall of the occupation of accounting”. (Yee 427) The certified public accountant (CPA) system in China re-emerged in the 1980s. From not having any role under a socialist regime and being discriminated against in society, the occupation of public accountants experienced an extraordinary turnaround and became formally recognized as an important ‘profession’ by the state (Yee 428). This change in fate was very much influenced by the political ideologies of Deng Xiaoping, who played the role of the chief architect of Reform and Opening up. Since then, the professional accounting system became popular in Chinese economic system.

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