China's more than 5,000 accounting firms are expected to undergo more market-driven mergers and acquisitions in the coming years in a bid to tackle competition from foreign counterparts.
More large-scale and internationalized accounting companies will be formed in China in the future and they should be able to provide a full range of services to domestic businesses as they become increasingly active in international trade and investment, Wang Jun, vice-minister of finance, said yesterday in
Beijing at a forum organized by the Chinese Institute of Certified Public Accountants (CICPA).
"I think the reshuffle should be driven by market demand instead of administrative orders," said Wang. "It will go slowly, but that will create better works."
Accounting firms are free to redesign their positioning and development strategies and find partners, according to Wang, but they should commit to good governance to ensure credibility and integrity.
As the Chinese economy booms, more Chinese companies including the biggest ones like Bank of China and China Construction Bank are seeking overseas listings, but most of them favour foreign accounting firms over local practices.
The scale and services of Chinese accounting firms is still limited, which is why they lose many top-layer clients, said Liu Zhongli, director of the CICPA.
According to CICPA statistics, China had 5,639 accounting companies at the end of April, with 69,800 certified accountants. But only 100-odd accounting firms had an annual income exceeding 20 million yuan (US$2.5 million).
And of all the 18.3 billion yuan (US$2.3 billion) in revenue brought in by Chinese accounting firms in 2005, most of it was from traditional auditing services.
These accounting firms should explore new services and enrich their product lines instead of fighting over low-end business, said Liu.
However, not all accounting firms should seek expansion.
"The reshuffle does not mean an absolute decline in the numbers of accounting firms in China, but a more diversified business model and a multi-layer industry structure," said Liu.
He also told China Daily that Chinese authorities are focusing more on the internal control and governance of accounting firms to lift the industry's reputation.
The CICPA is drafting harsher rules on the punishment of misbehaviour in the industry, such as price wars.
Eighteen domestic accounting firms lost their licences last year due to misbehaviours and 60 were penalized by having to reform and pay fines.
