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The Rise of Accounting
In China
Prepared By:
Serena Coleman
serenawis@gmail.com
414-870-1365
Table of Contents
Introduction 3
Significance of China in the Global Market 4
History of Accounting in China 6
Establishment of Accounting Standards 9
Financial Reporting and Auditing Requirements 11
Recent Developments and Impending Accounting Issues
Works Cited
Introduction
China has a population of 1.3 billion whose per capita income has grown tenfold since
1990. An annual growth rate averaging more than nine percent over more than two decades
has driven China to fourth place in the world economic league table. Many investors and
potential businesses see China as an emerging market and potential location for foreign
subsidiaries. China is characterized by intense competition and entrepreneurial activity in
almost every field (Read and Partridge, 2006).
Some major advantages and also major concerns exist in multinational enterprises due to
China accounting system. As China is one of the oldest civilizations in the world, their
accounting system lacked structure. China went from a double-entry accounting system, to
a debit-credit accounting system following Western Civilization, to other individual
systems that certain leaders felt would be more specific to China.
To remain competitive with other foreign accounting industries, China developed groups
of accounting professionals to research and develop accounting standards. The Chinese
Ministry of Finance was developed to establish regulations and standards for their current
accounting system. Under the Ministry of Finance, the Administration of Accounting
Affairs was implemented to assist China in conforming to a uniform accounting system.
Along with these two standard setting bodies, China also followed the United States in
developing the Chinese Institute of Certified Public Accountants. Compared with the
United States, China has gone through many previous and recent changes in their
accounting and auditing standards and is slowly moving towards more internationalized
accounting methods.
Significance of China in the Global Market
China is currently one of the fastest growing economies in the world. Many people find it
hard to believe that an isolated, communist country could turn into one of the world
leading manufacturers within two decades, but it happened. China overall success came
through a slow process of global integration and decades of economic self-sufficiency. In
1978, China was a highly regulated and isolated country under control by The Communist
Party. Post 1978, China went through a transitional stage where intercontinental
transactions increased drastically to a point where all countries are currently affected by
their industry (Zweig, 2003).
China affect on the global economy is due to its innovation and retention of manufacturing
and technological industries. The labor intensive factories of China produce 70% of the
