I write this column at the end of May while visiting China where I have just spoken at one of the profession’s most important events of the year, the China International Fair for Trade in Services (CIFTIS) in Beijing. The visit presents a unique opportunity to make contacts and get a first-hand feel for the profession and the direction in which it is heading.
The trip was initiated by the only current international Chinese accounting network, Reanda International, and backed by the Chinese Institute of Certified Public Accountants (CICPA), which welcomed me to its office where we had a long discussion about the key trends and challenges for the profession.
At CIFTIS I was asked to introduce the work of IAB and most importantly the rankings in an attempt to reach out to domestic Chinese firms and invite them to engage with the magazine.
I also had the unique opportunity to witness the ceremonial signing of the merger agreement between Crowe Horwath and RSM China, creating Ruihua, China’s third-largest accounting firm by revenue.
The merger goes a long way to play in the direction set by the Chinese government, encouraging accounting firms to become bigger and more international in order to follow the momentum set by large Chinese enterprises.This historic merger has led to a somewhat unheard of situation as Ruihua has asked to be a joint member of Crowe Horwath International and RSM for the time being. As the loss of Ruihua by either of the two networks would lead to a large gap in their coverage, joint membership might be on the cards for a while.
Looking beyond the unusual situation created by Ruihua, the impression I took away was that while China is welcoming of international accounting networks and associations it has a very clear ambition of its own – Chinese domestic firms must become international.
In the long run this could mean that some of China’s large domestic firms will look to build their own networks and follow the plan set by the government.
The need to be international is coming from large Chinese enterprises, which are becoming global giants and require services from highly sophisticated and global accounting firms, which means they are currently mainly using the service of the so-called Western networks.
Chinese firms and networks still have a way to go before they become large international players; however it’s far from impossible that they will do so. As a result of its strategy to grow domestic firms China has the strongest mid-tier market among the G20 and with Ruihua now breaking into the top four, the strategy is clearly successful.
Perhaps it will take another decade or two, but Chinese accounting firms have firmly set their goals on developing robust IT systems, developing talent, committed to high professional standards and, most importantly, to international growth.