China's new beginning
| by Colette Steckel 31 May 2004 Topic: Members profiles, People |
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David Wu FCCA, a partner at PricewaterhouseCoopers in Beijing, tells Colette Steckel about a new dawn in China, where business is booming and accountants are in demand David Wu is meeting me at the Grand Hyatt Beijing; a sumptuous hotel located in Oriental Plaza, Beijing's newly-built and ultra modern shopping mall. Rising above the ubiquitous musak are the animated voices of suited professionals in the lobby café, many of whom are doing early morning business over coffee and French pastries, and speaking in a medley of accents: French, Dutch, German, American, British, and Chinese of course. 'Ten years ago, China didn't have the kind of grand business hotels like the ones typical of big cities in the West,' says Wu ordering a cup of Green tea and surveying the commotion around us. 'Now we have international standard hotels, designer stores and upmarket restaurants. And we have become one of the biggest, and best, production houses in the world, especially in electronic goods. China has come a long way in the past few years. The country has become very successful.' Well yes, it has. Ever since former Communist leader Deng Xiaoping started the movement towards a market economy in 1978 - welcoming foreign investment and encouraging private enterprise - trade has fuelled China's economic growth and development, which in turn has heralded long-overdue reform to restructure the economy and boost growth. The pace of change accelerated with China's accession to the World Trade Organisation in late 2001, which ushered in important trade-related corporate and legal reforms that will continue to increase opportunities for international business. 'WTO entry is a huge milestone for China. Most Westerners view it as the opening up of China, but it's also about China's integration into the global system. It's important to allow much freer capital, goods and talent flows, which introduce competition and pressure on domestic business as well,' says Wu. China's eagerness to embrace the world market has paid off, with the economy becoming one of the fastest-growing in the world. In 2003, China recorded growth of 9.1%; a feat exceeded by the first quarter of 2004 when growth peaked at 9.7%. Although there are now signs that China's economy is potentially overheating - a concern the Government is taking seriously by restricting bank lending in a bid to crack down on rampant borrowing - its progress has helped global trade to bounce back from what could have been a potentially difficult year. 2003 saw the SARS epidemic in Asia and the invasion of Iraq but, according to the WTO, global goods trade for 2003 grew by an unexpected 4.5%, which is in no small part due to China. The total value of goods trade for the year was $15.2 trillion, of which the US contributed 13%, Germany 9%, and Japan 5.6%. China only marginally trailed its Asian neighbour with its contribution of 5.58% - a performance put down to an increase in exports of electronic equipment as well as a boom in traditional textiles and clothing. Wu agrees that China has made remarkable progress in the past two years since WTO entry but remarks that the next step in reform is to ensure that capital flows aren't hindered. 'As a production house, we can't sustain this pace and become an economic power if we don't reform our finance and business practices,' he reasons. A PwC report on doing business in China, which was issued in 2004, noted that promising economic prospects and a potential penetration of the domestic consumer market have encouraged Western investors to set up in China. By the end of 2003, foreign direct investment reached US$501bn and an accumulative total of 465,277 new foreign investment enterprises were approved in China. But the report, which canvasses the views of foreign businesses already established in China, warns that corporate governance needs to be strengthened in order to attract more investment; 31% of respondents thought that corporate governance could be improved. (1) Corporate governance Wu notes that corporate governance reform has only gained prominence in China in recent years. 'Corporate governance wasn't even talked about until recently because in China's planned economy, corporates were just like military unions. But as a market economy and with listed companies in China becoming a powerful force, the focus is on the introduction of quality management and a balanced board, which are significant parts of good corporate governance.' Taking the view that responsible companies would raise the confidence of international investors and attract more capital into China's markets, the China Securities Regulatory Commission has put corporate governance reform at the top of its agenda. But the need for reliable financial information is also seen as a prelude to further investment in China. The Ministry of Finance, the accounting standards setting authority, has for some time been upgrading China's financial reporting standards to bring them into line with internationally accepted practices. And a new law was introduced in 2000 to stamp out false accounting, a practice that was rife in China before the onset of reform. 'I think it's an exciting time for accounting professionals in China,' says Wu. How times change. When Wu first started out his career in finance, he had misgivings about becoming an accountant, although truth be told, he didn't have much choice in the matter. At school, his talent for mathematics brought him attention and a place on an accounting course at university in Hangzhou; an achievement he rates highly as he became the first person from his rural village to go to university. Although he excelled at his studies, he felt that accounting wasn't for him. 'In the 1980s, accountants were viewed as little more than cashiers or administrators. And also, there was this whole notion that accountants were associated with capitalism, which of course didn't fit with China's belief in communism. Accountants were ranked low as a profession,' says Wu. In 1988, ACCA brought its accounting qualification to China and sponsored a handful of accounting students, including Wu, who had just graduated. He joined PricewaterhouseCoopers as a junior in the Hong Kong office where he stayed for three years before moving back to the mainland to take up a senior associate position at the Shanghai office. Secondments followed to PwC offices in New York and Sydney before partnership beckoned two years ago when he turned 36. He is now based at the Beijing office where he specialises in banking and financial services; an industry sector all the more important in these days of surging investment and increased capital flows in China. 'My accounting qualification has connected me with a world I never imagined when I was a student. Today, I attend meetings with world-class board members with whom I can confidently debate good corporate governance and discuss complex business issues. Moreover, they listen when I make recommendations on financial matters,' notes Wu. 'Being able to share in the successes of my clients is a very rewarding aspect of my job.' Accountants (and lawyers for that matter) are increasingly seen as essential in China's investment boom. While foreign investors are demanding reliable financial information on which to base their investment decisions, mainland companies readying themselves for international stock markets are hiring auditors to go over their financial affairs with a fine tooth comb. Up to $23bn is expected in overseas IPOs according to a Forbes.com report in April, which perhaps explains why international firms like PwC and rivals Ernst & Young and Deloitte Touche Tohmatsu are investing in accounting talent. With demand for finance professionals on the increase, the regulation of the profession has come in for an overhaul as well. The Chinese Institute of Certified Public Accountants, the national organisation of certified public accountants and regulator of the accounting profession in China, has published a raft of standards on professional ethics, with the promise of more to come, and has pushed forward the notion of the social responsibility of accountants in China; a subject on which Wu has the last word before dashing off to his next meeting. 'As accountants, our job is to provide a service to clients, exercise our judgement to the best of our ability and provide an opinion with integrity. This is a profession that can contribute so much to society. To be honest, I would never have expected that accountants would become so important in China.'
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